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2021 looks like the year that housing supply caught up with demand - in most places, Greg Ninness reports

Property / analysis
2021 looks like the year that housing supply caught up with demand - in most places, Greg Ninness reports
Builders in front of house

New Zealand’s housing shortage appears to be over, especially in Auckland.

Interest.co.nz’s latest analysis of housing supply and demand suggests the number of new homes being consented has been exceeding the demand for new housing created by population growth for at least the last three years.

It also suggests that while a shortage of housing may have built up in some areas, particularly in Auckland, more than three years ago, historical shortfall between supply and demand is now likely to have been substantially diminished, if not wiped out.

The analysis is based on Statistics New Zealand’s latest population figures, which include population changes in all territorial local authority areas, based on the natural increase (the excess of births over deaths), internal migration (people moving from one district of New Zealand to another) and external migration (people moving to or from this country long-term).

We then calculated how many new homes would need to be built to house the increased population, based on the district-by-district household occupancy levels of the 2018 Census. Those numbers were then compared to the number of new dwelling consents issued in each district.

This shows that across the entire country, 30,231 new homes would have been needed to keep pace with population growth in the 12 months to June 2019, and 30,453 new homes were consented nationally over the same period. So over that 12 month period, housing supply and demand were in balance.

Then there was a big jump in population growth the following year (12 months to June 2020), mainly driven by a surge in net external migration numbers.

That pushed annual demand for new housing up to 42,692 additional dwellings, while dwelling consents increased more slowly to 37,614, leaving a shortfall of just over 5000 dwellings.

However, that shortfall was more than made up for in the following 12 months (year to June 2021) when border closures saw a dramatic decline in overseas migration, which pushed the annual demand for new homes down to 12,462.

New dwelling consents were not affected by lockdowns and border closures and continued to increase rapidly to 44,299 in the year to June 2021, giving a surplus of supply over demand of 31,837 homes for the year.

That surplus of new homes would have gone a considerable way towards diminishing, if not wiping out, any accumulated shortfall in housing supply over previous years.

Because migration remains severely restricted and the number of new homes being consented continues at near record levels, it is likely that the supply of new homes is continuing to outpace population-driven demand by a substantial margin.

However, it's worth noting that although consents are generally a reliable indicator of building activity, not everything that gets consented gets built and construction times can vary significantly.

Meanwhile there are, of course, significant regional differences.

The first chart below shows the annual demand for new homes in each region from 2019 -2021 (year to June), and compares that with new dwelling consents issued in the years to June from 2017 to 2021.

Some of the most compelling figures are those for Auckland, where migration-driven population growth has been greatest as have the consequent pressures on the housing market.

It shows that the supply of new homes in Auckland has been exceeding demand by a significant margin for several years, which would have slowly eased housing supply pressures in the region.

But what was a reasonably modest surplus in supply turned into a flood in the 12 months to June this year, when the dramatic decline in migrants coming into Auckland saw the region’s population decline for the first time since records began and the surplus of housing supply over demand skyrocketed to almost 19,500.

So it’s likely that 2021 was the year when housing supply caught up with housing demand in Auckland, and possibly overtook it. This has important implications for Auckland’s housing market.

An increase in supply over demand could relieve pressure in the rental housing market, increasing vacancy levels and putting downward pressure on rents. When combined with rising interest rates this could also put downward pressure on property prices.

Other regions where the supply of new homes exceeded population-driven demand were Canterbury and Otago.

However there were also some regions where supply has fallen short of demand, most notably in the upper North Island in regions such as Northland, Waikato, Bay of Plenty, Gisborne and Hawke's Bay.

In particular, the supply of new homes in the Bay of Plenty has fallen woefully short of the demand created by the region’s population growth.

The second table below shows the average annual demand for new housing by territorial authority and Auckland local board area over the three years ending June, from 2018 to 2020, and compares that with the average number of new dwelling consents issued annually in the same areas over the same time period.

It is colour coded, with areas where demand exceeds supply highlighted in pink and those where supply exceeds demand highlighted in green.

What the figures tell us is that there are some areas of the country, most notably Auckland, where the supply of new homes is roughly in balance with the demand created by population growth, while there are other areas where more work needs to be done to boost supply.

The figures also highlight that the pause in migration in place as part of the pandemic response measures has given the housing market some breathing space, allowing a much needed re-adjustment of the housing demand/supply balance.

However, looking forward, that balance is a fine one.

There are not yet any signs that the housing market is entering a period of significant over-supply

If immigration was to resume at the levels that occurred over 2019 and 2020, the balance could easily be tipped back into a shortage and all of the issues associated with that.

So, much will depend on how quickly and by how much the Government opens up the borders to immigrants over the next couple of years.

The comment stream on this story is now closed.

How to measure housing supply and demand

When interest.co.nz set about updating our estimates of housing supply and demand we realised there was no perfect way of doing so.

The demand side figures are based on Statistics NZ population estimates and the household occupancy levels from the 2018 Census.

Although both sets of figures can be regarded as reasonably reliable, they are estimates, not exact figures. But they are probably about as good as it gets for estimating the demand for housing generated by population growth.

The supply side is a bit trickier.

We used building consent figures to estimate supply.

Although consents are also a generally reliable indicator of building activity, not everything that gets consented gets built and construction times can vary significantly.

And some homes may be demolished to make way for new ones, so using building consent figures to determine what was built and when, and how much this adds to the total housing stock, will always involve a margin of error.

An alternative would be to use Code Compliance Certificate figures because CCCs are issued by councils when a building is completed, which should give a more accurate picture of how many homes are actually being built and when.

But some councils are not very good at collecting this information.

Interest.co.nz contacted several councils around the country and asked them for building completion data when compiling this report, to enable building consent figures to be compared to actual completions.

Some, such as Auckland, were able to provide the information in a speedy and efficient manner. Unfortunately the response from others suggested it took a bit of bureaucratic legwork to dig out the data. The implication is that it’s not something that they are looking at routinely, relying instead on building consent data.

Looking at the dwelling completion figures various councils provided us suggests the overall variance between consent numbers and actual completions could be around 5%. But that’s at a time when demand for housing is high and the market has been running hot, making it less likely that a consented project would not proceed.

That could change if conditions deteriorated and the market headed into a downturn.

Councils that aren’t already doing so might like to think about producing timely data on building completions, rather than relying so heavily on building consent figures.

*This article was first published in our email for paying subscribers early on Friday morning. See here for more details and how to subscribe.

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166 Comments

When the government does eventually throw the borders open again - completely ignoring the sustainable levels of immigration we were all promised back in 2017 - they'll have a bit of a dilemma on their hands as to who to let in.

On the one hand, we want poor unskilled workers desperate enough for our primary industries to exploit. On the other hand, we need people with enough cash to buy up all these houses that nobody else wants, since borrowing money is going to be next to impossible.

I wonder how this could be reconciled. A new "home-buyers" visa category? Subsidised loans to our primary industries, underwritten by the taxpayer (duh), to buy up houses for worker accommodation? It will be interesting to see what they come up with.

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It will be interesting to see what immigration settings are in the next few years or decade.  I have had trouble understanding what are our immigration objectives are or have been in recent times.   Is it more farm workers as young kiwis don't see a pathway? Is it high skilled workers for the Tech industry?  Is it more Uber drivers to deliver takeaways?  Is it let's have more population to support big investments in public transport? 

It does seem that recent Politicians has used immigration to goose GDP numbers, that may seem cynical.  However it would be nice to see some clear policy objectives for immigration.

 

  

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It’s gotta be high skill / high value only. No more chefs. No more level 7 diplomas. If you’re coming here you need to be in a job that can pay you $100k pa. Everything else we either use Kiwis, seasonal workers from the Pacific Islands or businesses need automate or use robotics. It would be good if the Government could support businesses by making loans available for labour-saving capex similar to the BFS Guarantee so businesses can access this funding at say 2% and make long-term transformation cost effectively.

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Completely agree about high skill / high value.  I don't mind chefs if and only if they earn over $100,000 (Jamie Oliver?).  Low wages means the rest of us are partly supporting them by paying for their social costs: medical, educational, road infrastructure, etc. Low wages means importing 3rd world working conditions. Low wages opens up opportunities for rorts and corruption; for example remember the Herald's headline that was a quote to an Indian female immigrant: "No sex, no visa". Low wage immigrants reduce work opportunities and training opportunities for our young and low qualified Kiwis.

Seasonal workers from the Pacific Islands are not immigrants.  They can be an effective way of providing foreign aid.

NZ does need immigrants and where they are truly needed employers will pay.  Such high value immigrants will buy houses.

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I too have wondered what immigration objectives have been all about. I do know from personal experience (and documented evidence) that some employers have provided blatantly false imformation to justify employing foreigners.

It surprises me how easy it seems to have been in the pre-border closure days to dupe the Immgration office with poor evidence into dishing out work visas when so many more qualified Kiwis were being willfully ignored.

I know two main reasons for prefering foreigners was to be able to pay them less and easier disposibility. 

But the way supposedly respectable managers lie on official documentation astounds me. Just business?

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The more they pay them the less likely they are to be lying.

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The border closure dropped almost 300k people from NZ, students, part time workers, travellers, in fact all those that filled the short term work roles.  Luckily hospo and tourism can't operate so these are less noticeable, but just wait till we open up........

Reality at present is that the few people who aren't employed are unemployable.  I could not let them drive forklifts or operate machinery, we pay well above minimum wage at a starting rate, and can't get enough to operate a factory. 

Our product is a basic grocery staple, and 2 competitors have just left the market due to supply chain and cost increases.  Even then, we are struggling to get workers for almost all roles.

There is insufficient labour to fill industry needs, once the shops open again, your food factories staff, delivery drivers, hospo workers etc won't be there.  Supply chain is a barrier to business at present, labour is going to be a much worse problem. 

When your food can't get made, will you rethink your comment?

 

 

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Primary industry pays the bills. Look at the latest trade deficit numbers. In the absence of international workers why can’t the university semesters coordinate with timing for fruit picking ? Labour shortage solved, student debt reduced. 

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That is way too practical...

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That would be the government 'picking winners'. Can't do that in a free market economy. Against the rules.

I do think there's a free-market opportunity there for the... picking, though.

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If I was a FHB, or saving to be one, I would look at TOP policy statements. Lower targeted immigration, and lower income taxes offset by a universal land tax. All of which will absolutely continue to pressure prices downwards.

All other parties, National, and National Lite (Labour), are boomer driven promoting endless support to the ponzi. This is in the form of higher low wage immigration, depression of wages, the reopening of international land ownership to boost boomer portfolio prices, and interest rate suppression to make the whole thing work.

Until the <35 age group actually start fighting their corner in the elections with meaningful policy outcomes for their demographic, absolutely nothing will change.

 

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Umm so why is there less homes for sale across NZ. 19800 today vs 26300 12 months ago, down 25 percent. Auckland is down 20 percent over 12 months from 9800 to 7800. Consents and constructed is not the same thing when build costs have escalated since the time projects were planned months or even years before 

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Because irrational people are treating houses like toilet paper.  I’ve been saying for some time that supply (stock) of housing is not the same as houses available to the market, and although the two would normally correlate, clearly a Covid-induced disconnect has occurred.  This will unwind just as the TP shelves were restocked, just needs the masses to resolve their collective cognitive dissonance. 

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The NZ housing market goes up and down over time. Fluctuations in housing supply/demand, buoyancy levels and regulatory intervention go with the territory.

But house prices have a record of being resilient - tending to trend upward over decades.

TTP

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No argument from me, except to say the rate and degree of recent rises puts us at an hypoxic altitude vs the long-run moving average, the likes of which we've not seen for quite a while, if ever.  Couple that with a confluence of price suppressing conditions and we are likely in for a bumpier ride than usual. 

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There are all sorts of reasons that could cause this. The brightline test, a perceived rising or falling market etc

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Price expectations are a huge driver and the reason everyone is so concerned about step increases - the steeper the mountain on the way up, the steeper it is on the way down, this is just basic market dynamics and the property market is just a market. 

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Forecasts done 25 years ago by credible investors in the mid nineties when the median Auckland house price was 200k was for a one million dollar median. Totally true! I listened to that and started investing.

People were in dìsbelief, refusing to accept the inevitable and instead were talking of crashes and great depressions. Yes there has been short term blips but who cares because a house is there for a roof over your head long term. Not buying today selling tomorrow 

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Yes the brightline is having an effect to dampen supply. The political move based on envy to shift it from 2 years to 5 years to ten was none too bright.

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How is it envy?

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In property specuvestor world 101, anything that kills my capital gain, or closes any inequity, is classed as envy. 

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It's an interesting insight in the greedy mind.

I'm fortunate enough to be in the upper ends of the tax brackets. I'd never even considered it's the poorer people doing this! Them and the government. They're envious of me... Yes... that must be it! /s

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There is still time to be the greatest fool.

Be quick.

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That's right BL those who have delayed and delayed expecting the great crash will now be somewhat older, still renting. They probably took your advice not to buy, so who is the greatest fool 

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I don't provide advice. I leave that to arrogant geriatric clowns.

But to answer your question, since greater fool theory is obviously new for you.

https://en.m.wikipedia.org/wiki/Greater_fool_theory

With a speculative bubble, the supply of greater fools always runs out in the end.

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You obviously did not get my subtle dig. You have thrown the "greater fool" quote out there previously long before now, advising others not to buy at that time. Using hindsight it is obvious that you were wrong. I hope no one took your misguided advice, but if there was one who did, who is the greater fool ... yourself or the one who swallowed the lie?

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Timing the demise of a Ponzi scheme is fraught with danger, but the longer it goes, the higher the probability the next buyer will indeed take home the wooden spoon.  We appear to be very near that point.

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Which if we were talking about something that is a Ponzi scheme might be relevant. 

We are talking about housing market, its not a Ponzi, its a real market with many drivers. 

If you want a Ponzi they are out there, saw one on Facebook the other day, the $4k challenge or something, a literal Ponzi scheme targeting those that can least afford it. 

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I'm being hyperbolic, it's not a Ponzi of course, but it is a market that has disconnected from fundamentals and will correct at some point.  My money is on 'soon', literally. 

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It'll correct over many years with wage inflation outpacing house price rises (and maybe some small house price falls)  Not going to crash with a bang. 

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That's certainly a credible scenario, but it's dependant on the level of economic shock we're about to experience.  I think you may be suprised at the speed things end up unwinding.  Only time will tell.  

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His view is a bit categorical.

An international financial crisis could be a trigger for a crash. With unaffordability pushed to the limits and less ammo to respond to a crisis...

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Possible, but as usual all the stops will be pulled and liquidity and interest rate suppression poured on if it starts going that way.  The can gets kicked a bit further. 

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As you seem to be very slow to grasp, I avoid providing advice or predictions. I just observe and ridicule the collective stupidity I see before me.

You seem to be triggered that I have simply pointed out the indisputable fact that somebody has to be the greatest fool.  Only in hindsight will we know when and who it is.

But, in my opinion, if you are quick, maybe it could still be you!

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Hi Brock. I wouldn’t even cross swords with guys like him. They throw the word ‘envy’ around, the reality of it is that anyone with 2 brain cells could have benefited by leveraging in the property game over the last few decades. They simply don’t have the imagination or logic to understand the social impact of their behaviour. Keep up the good work. 

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Btw how is your single cell Tom Jones. You obviously have little to no idea how business operates in general. Thanks for the comment 

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Hi HW2. 
In order for envy to exist, there needs to be a care factor there. I have no interest in owning rentals as it’s a non passion of mine. Lucrative, yeah sure, but my interests are elsewhere and I think that’s fair enough. It’s unfair to say I’m envious of you because that’s the path you walk.

I’ve made some good choices professionally  and choose to take care of myself, if you met me you might feel envious, but I wouldn’t throw that fact at you. You are right, my business acumen may not be as astute as yours, but then it could be. Neither of us will likely never find out.

I also choose to own the roof over my head because I have 3 beautiful kids and I like that they have stability. Apologies for sounding self indulgent here but I am not envious of many things… we are all different. I’m just highlighting that accusing everyone of envy doesn’t endear people to you, but I do like and appreciate everyone’s commentary on this website and I enjoy a bit of banter. Cheers, Tom 

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... sucker 

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Flying high… huh? 

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Where were you in 2008-2010? Sleeping?

Prices for fall 30%. There were places in NZ where prices were 500k but went down to 400k for intelligent and learned buyers.

But yes foolish still payed more. I know of a few of my neighbors at the time.

So yes the prices fall and you have to watch for it and put your money when and where the time of right. 

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Not sleeping.... buying and building. I notice you only talk of what others were Doing, yes watching from the sideline would be your best move

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House prices did not fall 30% between 2008-2010 on average, it was barely 10%

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They'll trot out 'real prices' which are Irrelevant, you only buy a given house once, and it price is fixed when you sign the contract, so adjusting for inflation is nonsense. 

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It seems there was a bigger supply of greater fools than anticipated, or some fools were much more foolish than expected.

However, with the banks riening in DTIs on their own accord, perhaps the supply of fools is no longer an issue- banks simply aren't going to let them be foolish anymore.

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" And some homes may be demolished to make way for new ones..."

That is a big one near where I live on the North Shore. There must have been more than 30 houses demolished which have yet to be replaced let alone be replaced with more houses. In Maori owned developments.

This will happen but right now there is a deficit of houses compared to what there used to be.

Personally I think construction will overshoot because its the only game in town right now. Unless massive low skilled immigration kicks off again. But would they even be able to afford the rent in a new house? 3 to a room maybe.

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Uninterested - Where I live on the north shore (BeachHaven / Birkdale area) construction of new builds is actually happening - it’s going crazy. And typically one house on a MHS zoned section is demolished and replaced by 3,4 or 5 townhouses. In some cases, the old house is kept and 1-2 additional places built. Even more intensity is happening on MHU zoned sections. It’s quite astounding the rate of build. And another sign of the market changing is that  ‘for rent’  signs are appearing.

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Visited your area the other day, building has definitely picked up. 

It’s not a patch on Te Atatu Peninsula though, there are dozens and dozens of previously single house sections at various stages of building, each hosting a minimum of six but usually ten-twelve ‘3bed’ townhouses. )A bed is literally all you can get in the rooms

 

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Which makes me think the recent govt announcements are actually a bit pointless, because I don’t see many places where they are only building 3 houses on one section. It might actually lead to less building (don’t need resource consent for 3 so that time difference makes it more profitable than 5). 
it will change the rich areas I guess where the council don’t issue resource consent so they don’t offend the nimbys 

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Te Atatu, New Lynn and Avondale have way more building going on than Beach Haven which being a small costal suburb filled with Valleys will never have that bigger concentration of Terrace housing. The vast majority are single level stand alones on cross lease sections. 

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There are some very interesting factors conspiring at the moment that I believe could well change things in the property market like we haven’t seen for some time. I am not in the ‘property game’ so to speak (investing) but even in my relatively small circle of acquaintances I know several people with investment properties, some with several (>10). So if say there was a rush on selling, for whatever reason, and with all the other information we now have would we not see a very sharp swing in supply? Especially if this is combined with buyers getting a bit gun shy, practically zero immigration, NZers heading offshore for better opportunities etc.

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I agree, it could get very messy. If the capital gain dries up and the rent will barely cover the increasing mortgage costs with higher interest rates, surely a reasonable percentage will sell. I doubt they can squeeze any more rent out of people, especially with all this building going on. You don’t need that many to sell at once to create a buyers market. The big question is how many will hold-‘‘em if prices go backwards?

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Yes, important point - less potential to increase rents with all this supply coming on. And immigration close to zilch, and unlikely to start up for a while.

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You gotta know when to hold em, you gotta know when to fold em. It's a line from a song, which has relevant name...

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Now we just need an increase of people who can pay over $1mil for a home. Bless. 

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It is not an entirely NZ city phenomena. I arrived in 2003 and my modest property in London allowed me to buy a detached house on a big section in North Shore. The comparison is of house price to average annual income makes Auckland look bad but if you compare international wages then NZ is lagging.  You can sell an apartment in Paris and buy a house in Auckland.

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This is what all the Chinese do by selling out their shoe box apartments (~50 - 70sqm) in Shanghai, Beijing and Hangzhou for USD $1 mil to 3 mil then come to Auckland and buy a 3-4 bedroom house in Central Auckland. For many this is an absolute steal because they can send their kids here for their education and substantially improve their family's quality of life whilst getting their wealth out of the CCP-regime. @Lapun, most people locally born and without expat experience cannot see the bigger picture.

One thing is that NZ does serve well as a bolthole during the COVID pandemic due to an open economy and able to work in a professional setting earning income albeit online and lower than international standard. Beats being unemployed and not knowing what sectors will collapse back home for now. Secondly, due to the kiwi passive culture, the violent crime rate remains low (outside South Auckland) so with lower wages, you and I are essentially paying for this upfront for our personal safety and security.

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I have said before, it's not far when NZ will become the bach house of the rich of the world. Who will come here to party and holidays. Just look what Europe did to Greece.

There has nothing for the younger generation to be here. No growth, no opportunity. If you are young and educated, fly out. The world is big and waiting for you with plenty of great opportunities for you to grow. 

The only growth in NZ is in cleaning companies and uber drivers. 

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They could also buy a mansion on an estate in the south of France.

Or they could settle in Gore.  New Zealand gets a 1/10 for the quality of its baguettes though.

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I wouldn't want to stay in France even if the mansion is free.

Gore is a beautiful place, the Brown trout capital of the world and second to none.

Perhaps a little fly fishing may be therapeutic on your Sundays.

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Each to their own level of sophistication.

The astute connoisseur would find France to have much better food, wine and women.

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They have razors these days?

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Yep but I bet they still smoke like trains.

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Gore is a beautiful place ahahaha

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Pourquoi pas ?

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In Paris the city center is filled with people who earn shit tons more than the average kiwi family in the burbs.

Not a like for like comparison

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I was talking to a chicken little prepper guy in his 50s who was negative and was like this for the last 20 years - "World is ending, don't buy property" (I think he lost everything in the 2000s economic crash and decided not to get back up or try at all).

If he had simply bought a simple home for say $300K back then in AKL and say on it, he would made a $1,000.000 in equity with a house in Ellerslie/ Penrose. The huge differences this could make between someone who's now poor as f whilst bichn and moaning about the world and someone else who just bought something and has a comfortable retirement nest egg to live off. This is truly life changing and impacts your worldview, psychological outlook and general health and wellbeing.

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So what you are suggesting is that:

...he lost everything in the 2000s economic crash...and (that) impacts your worldview, psychological outlook...

Most likely. And that's the problem. Many today haven't had a 'setback' of a significant magnitude, and so don't believe one is possible in their lifetime. They won't recognise it when it knocks at the door, and won't know what to do about it when it does. "It’s a lesson too late for the learning".

The person who 'lost everything in 2000' will certainly know what it looks like as it creeps towards them.

Here's a view from the US this morning:

"We may face the worst policy-induced economic calamity since the Smoot-Hawley tariffs triggered the Great Depression.

But even if not calamitous, it will be bad. Those in power have slowly but surely painted the economy into a corner. Every option is bad.

https://www.mauldineconomics.com/frontlinethoughts/trick-or-treat-econo…

So. Nothing to worry about or factor into a decision-making? "It's all easy, looking back...."

 

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(PS: From that link:

"We know policy changes are coming, though not exactly when.....The forthcoming changes will build on previous policy changes that were ineffective at best and probably outright harmful.... most of the new money is trapped in the (asset) markets....It can’t escape unless banks lend it to someone. The willingness to do so has been shrinking, not growing...Now we see 5% inflation, improperly measured. If we measured actual housing prices, inflation would be in the high single digits at a minimum....COVID simply accelerated what was going to happen anyway. Indeed, it was already happening: Low GDP growth, high living costs, flat wages for many workers..In January 2020, I said we were entering the Decade of Living Dangerously. That’s proving to be an understatement."

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Yep totally agree. This common attitude of “you missed out” or “you would have been wealthy if” is pointless waffle and to be honest very dangerous. Anyone can make such comments in hindsight but the fact is if you didn’t buy then you haven’t “lost” anything. However if you do commit and it goes wrong, you could literally lose everything. Property isn’t the meaning of life. I would love to see and end to this greedy short sighted mentality.

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>If you didn’t buy then you haven’t “lost” anything.

 

Of course you have.  You lost X years of building equity in your own asset and instead spent X years renting somebody else's asset.  And in that time price inflation made getting into your own home harder.

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You must be near suicidal about how much you "lost" by not investing in Shiba Inu last year.

https://coinmarketcap.com/currencies/shiba-inu/

 

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You can't live in a shit coin.. 

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Just a shithouse 

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Tell it to whoever owns this account.

https://etherscan.io/address/0x1406899696adb2fa7a95ea68e80d4f9c82fcdedd

Bought a few grand worth of shibs last year, which has now grown to be worth five billion dollars.

He's living in his lambos and laughing at what you "lost" obsessing over kiwi rotboxes.

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Me obsessing?   You seem to be the one posting 30 times a day on here..   

 

I have no interest in gambling on shitcoins, I'll stick to the occasional lotto ticket. 

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"I have no interest in...". 

Oh!  Thanks for the reminder!  Time for some classic Rammstein: 

https://www.youtube.com/watch?v=1M4ADcMn3dA

Ich hab' keine Lust (I don't feel like)

 

My favourite line "Ich hab' keine Lust, mich zu wiegen", or in Pragmatist's case "Ich habe keine Lust, auf Scheissemuenzen zu spielen"

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That equity you write of? It can be $zero tomorrow if it is pledged to a lender (Innocently called, LVR!) - or worse, negative. It's happened before and can again. Besides, that 'rent' component can also be reclassified as "Interest paid to the bank"?

But for those who "Follow the Money!", should we take notice of the World's richest individual? He may be an acquired taste, but you'd have to say he's been right about a lot of things.

Where will Elon Musk live when he sells all his homes?  "I am selling all my houses...I will own no house."

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You have to have something first in order to “lose” it. So you could say because I didn’t invest in Tesla shares a few years back I lost money, ridiculous.Classic FOMO mantra. 

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You didn't have a place to live?  Cardboard box under a bridge must've sucked. 

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He doesn't understand he's actually losing money in more than 1 way.

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Smudge, for your own good, please reconsider your statement,

"if you didn’t buy then you haven’t “lost” anything"  "You have to have something first in order to “lose

This kind of misconception is very harmful. Standing still in a world that moves forward is falling behind and, indeed, losing.  Please learn about opportunity cost  (I'm not writing this to be argumentative but truely to try to help)

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What smudge is saying yvil is that to apply the theory of opportunity cost, one must first have opportunity. No capital = no opportunity 

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I don't buy it, Smudge can read and write, he's got a computer and an internet connection, so he has opportunity.  You do not need capital, I certainly stated with no capital, you borrow the capital.

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You and I are from different generations with different economic conditions. My parents raised 5 children on one wage and bought 3 farms and 5 rentals with no inheritance. My wife and I own 1 house with her parents putting in for a deposit. Apples and oranges 

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Hi YDB, yes things are certainly different today than 25 years ago but at the core, what determines how successful we end up in life is us, what we do with what we have. 

Sure it's much harder buying a house today but there are plenty of other opportunities that didn't exist 25 years ago, cryptos, NFT's, apps etc... You just have to find something you're passionate about, learn all you can then be brave and go for it

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what determines how successful we end up in life is us, what we do with what we have. 

That is easy to believe if you're of the generation that has benefited hugely from economic tailwinds that have been almost entirely in your favour. Younger people know from bitter experience that that is largely untrue. 

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al123, we are always right in what we believe, if you believe that "your generation has it tough and that you will never get ahead", that's exactly what will happen in your life. If you're brave enough to challenge this belief and replace it with "I can do things to get ahead in life and be happy" that's also exactly what you'll get in your life. The choice is yours

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From a motivational perspective, thats probably right - but that doesn't mean it's true. 

And I didn't say I believed my generation will never 'get ahead' (though what or who we are supposed to be getting ahead of isn't clear). 

What I said was that it is not true that what determines how successful we are in life is what we do with what we have. That's only a part of it. And those who have been very successful (in large part because of economic and policy conditions in their favour) who preach that kind of mantra have a vested interest. For them, it's better if those on the losing side of policy decisions focus only on individual actions (doing the best with what they have) rather than thinking about challenging the political status quo. 

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Something just not right there mate. All those houses and farms and they gave you no financial assistance at all ? My parents split and from one house went to two and they both still helped me out at the start, it was life changing. Basically it allows you to get into property and every dollar they give you is worth two dollars in the long run.

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If I had asked they would have no doubt. But they earned it so I never felt entitled to any of it. My wife’s parents wanted to give some coin because they did the same for her sister. 

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For my own good Yvil, really? Last time I looked this was a place for discussion and we are all entitled to an opinion. You seem to have no understanding that some people my have different perspective and priorities in life than you. 

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Of course we are all entitled to our opinions. The point I'm making is that some of our beliefs (probably inherited by our well meaning parents) are quite detrimental to us without us realising it. IMO your post that you cannot lose if you do nothing is one of those dangerous, detrimental beliefs

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Perhaps more detrimental is the belief that "you cannot lose with housing"

 

 

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Not everyone is obsessed with money and material well being.

For me, it's important to be financially comfortable, but money is a means to an end, not the end.

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Really.. Money makes you happy?

You are here in this universe with consciousness for a very short period of time. Don't make money as your success.

On top of it buying houses is not success.

 

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Lots of money may not make you happy but I can guarantee that no money makes you as miserable as hell.

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Yup. The only people who think money doesn't matter are people who have always had enough of it. 

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It’s a really good point. Sometimes I wish I had invested in x or y, but at the end of the day I have a good amount of money; enough to live a good life and not enough that I don’t appreciate it. and I haven’t screwed anyone over along the way. 

I almost feel sorry for some people who have made millions to be honest. Not as sorry as I feel for those they screwed over of course. 

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Jeff bezos very suckcesfool cant hold on to his wife

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Jeff is one ugly bastard though. Any female would take half the money and run, hell they don't even need that much money before they take half and run !

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He works 70 hour weeks, surrounded by aides and hanger ons and can buy a new wife every day. He is living a different planet to you or I. 

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Notgreedykiwi, money gives you choices !

Pretending one dislikes money is a lie, be honest

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Those choices do not come by buying houses and selling them again at a profit so you can screw the next generation. Money is earned by hard work and by building something meaningful in this world while you are here. Don't make your life meaning less by buying and selling same house 20 times. 

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Anyone who buys early in a bubble does well. It’s those who buy in at the end that suffer. 

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Numbers for Wellington don’t seem to match the local experience, but that might be due to the high number of dwellings being consented being 1 bedroom apartments, so there is still an acute shortage of family dwellings.

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It's pretty easy to catch up with demand when prices have spiked so far that buyers who are after any shred of value ceased to be potential buyers long ago.

We've always been able to supply houses, but we still can't supply them at sane prices. Compare two developments of four townhouses, both identical, but one supplied at $800K for two bedrooms and one at $500K. Both of these have the same effect on 'supply' but only one of them is remotely approaching sane levels of pricing. 

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Many thanks for doing this, Interest! It’s exactly the question I’ve been wanting empirical answers to. Wonder if other media will pick up on it.

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I do not care about media.

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Now that supply in Akl is likely to match or just exceed demand I wonder how the affordability is going to stack up. Its only affordable now with huge debt to FHB but relatively easy for existing residential property investors. Affordability is still a problem and requires a 25-40% fall in house prices to bring back to more realistic levels. Unfortunately I don't see that happening.

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Every thing is possible to happen. The human greed just wants to believe it that only way of up and make more and more. It's like a gambler who keeps playing for want to always winning and winning and winning. 

But if everything always went up and up, then they reach at stage where there is no way to go up and just float and when the fuel runs out, gravity brings it back down uncontrolled, then either it burns or crashes in pieces. 

 

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Love how you see the world in a bipolar fashion.

Just a hint, you didn't see it can go sideways.

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So if a plane runs out of fuel it can just glide along indefinitely? There is only one way that plane is going to go.

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The NZ Herald is worried. Articles appearing there dismissing hyperinflation and  very large interest rate rises.

I actually agree with them, but I suspect they are writing that with somewhat cynical motives.

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Eh??... you agree with what the news says but think they should not report it. That's fairly strange

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I didn't say they shouldn't write it.

I just said their motives for having many articles on this are probably cynical.

Real estate is a huge revenue source for them, their reporting on property is often very one sided.

We never have any DGM articles from them.

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So along with huge construction cost increases and interest rate rises, over supply will be another reason we see a big slow down in the residential development sector in 2022.

Watch this space. 

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Throw in the reason that Adrian is 'concerned'; that lenders will stop lending - a Credit Squeeze, and I think we've just about got all the bases covered.

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I reckon there will be big job losses in that sector by this time next year.

A lot of jobs have become reliant on the sector - builders, subbies, tradies, architects, engineers, surveyors, planners, RE agents etc etc.

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Yeah same. I hope the govt is ready for kiwibuild 2.0 and don’t just let the whole industry disappear again like National did. 

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If they get more momentum in their state house building programme it could mitigate a bit of the damage.

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Good point. To me the biggest government cock up was from the national party after the GFC. We went in with low debt, they should have used that position to stimulate the economy by building houses (they had campaigned on lowering house prices) and infrastructure. Instead Bill English locked away the cheque book, he didn’t use the rainy day savings on the rainy day. Hopefully GR is a bit more intelligent than that although the covid debt makes it a bit different. 

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Or, we could have kept the debt at a managable level and not neglected the infrastructure in the first place in the years leading up to 2008. Funny how the infrastructure suddenly mattered when it was National in charge after years of running it down to pay down debt (and taxing the absolute bejesus out of anyone daring to earn over $60K), but it's nice to see how you're already making Covid excuses for Robertson even though they were elected years before Covid was even a thing. 

Also, love how it's National's fault for not making house prices cheaper but not Labour's fault for it happening under their watch to begin with. Now where have I heard that before?

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I’m not exactly a labour supporter, and yes they could have built more in their time too. But there was a big drop in house building after the GFC, I know tradies that did it tough or went under, and then all of a sudden we had people living in government sponsored hotels etc. The best time for government spending and stimulus is after a financial crisis, I hope Labour remember that if we have one soon. 

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Perhaps its finally time that investment is going to have to be supported by income. This will be underlined by DTI requirements and spotlighted by the increases, and future increase in debt.

Good to see tenants will have more options.

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Can someone tell me why this kind of bogus news floated every now & then, which predicts the future without any accountability?

Later the writer never comes back with an apology after falling flat with his analysis, that's what we have seen for predictions on the impact of the Chinese virus in 2020.

Prices are still crazy high, the supply is still low & nothing will change till this govt is in power 2023.

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A difference in opinion makes us a market.

The author had just started one.

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The statement that a housing crash in NZ is not possible reminds me so much of this little funny parable:

"The turkey found that, on his first morning at the turkey farm, he was fed at 9 a.m. Being a good inductivist turkey he did not jump to conclusions. He waited until he collected a large number of observations that he was fed at 9 a.m. and made these observations under a wide range of circumstances, on Wednesdays, on Thursdays, on cold days, on warm days. Each day he added another observation statement to his list. Finally he was satisfied that he had collected a number of observation statements to inductively infer that “I am always fed at 9 a.m.”. However on the morning of Christmas eve he was not fed but, instead.... had his throat cut."

- Bertrand Russell

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Agree. 

Other one is the sheep spend all their life faring the wolf only to be killed by the shepherd. 

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80% of the existing houses in Auckland may as well be knocked down, no longer fit for purpose. many probably will be if this intensity increase goes ahead.

Did the analysis cover how many old houses will end up being removed from brownfield development? I didn't see that

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Hmm why the FOMO & ridiculous prices then?

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A lot of the behaviour is irrational, and doesn't consider rational factors such as supply/demand balance.

But some of the FOMO is rational too. Interest rate rises are on the way, buy now and lock in...

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Lock in that massive mortgage for a maximum of 5 years and hope for the best...

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The methodologies used to derive at supply and demand are problematic from a technical perspective.

An easier way to determine demand and supply balance is to look at the price- the collective knowledge of all the market participants are contained therein.

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Ah yes, the old efficient markets hypothesis. Which is obviously false, or we wouldn’t have boom and bust cycles.

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Oh dear, we cant have an excess of houses causing prices to stagnate or drop.

Demand and supply...

What's the bet the govt will throw open the borders bringing in more migrants to keep the housing ponzi going?

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How is it a ponzi?

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Jacinda sweating bullets, unsure what button to press:

1) Keep borders shut and Covid out, house prices nuke.

2) Open boarders, let Covid lose, house prices stable/up.

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Well, FHBs, there you have it, direct from Greg, our property guru:  Auckland supply now exceeds demand by 443 and as you look around you still see hundreds if not thousands of homes still being built.  As more new ones come on stream you can expect the prices to tumble due to the indisputable logic of supply and demand.

So, just sit back and watch the tumbling prices and when they inevitably become affordable make your move.

Don't worry about interest rates increasing because if you extrapolate the above situation you will conclude that the reduction in prices will more than exceed any increase in interest rates.

I think we all now owe it to the Ardern Government to give them heaps of credit for fixing what the previous governments failed to acheive. 

WELL DONE JACINDA!!!!

And well done GREG NINNESS for so promptly bringing this good news to us.

And if Jacinda's Government will now just isolate those traitorous anti-vaxxers in leper-like colonies we will have truly lead the world and Jacinda will go down in history as one of the world's great stateswomen.

 

 

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Sarcasm or drunk?

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A typical ad hominen reply to someone who draws rational conclusions from the evidence supplied by a professional and reputable property comentator.

What part of the evidence that Greg presents do you not think is infallible:   

That there is not a surplus of 443 homes in Auckland?  That Greg's data is wrong.

Or are you not aware that new homes are currently being built and flooding on to market on just about every street in Auckland?  Or perhaps you live in Eketehuna?

You're calling Greg's veracity into question.  Do you believe he is presenting us with false information? Then why don't you call him out directly?

Simplistic retorts don't cut it.   Give us facts and figures.

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Oh you were serious!  I do not dispute Greg's great article, your interpretation of it on the other hand…  Here are some answers to your question then"

"Auckland supply now exceeds demand by 443 and as you look around you still see hundreds if not thousands of homes still being built"

1) Greg is not saying Auckland supply now exceeds demand by 443, rather he's saying there have been 443 more dwelling consented than needed over the last 3 years.

2) The thousands of homes you see being built are not in addition to Greg's figures, most are included in the building consents 

Don't worry about interest rates increasing because if you extrapolate the above situation you will conclude that the reduction in prices will more than exceed any increase in interest rates

A price cannot denominated in $ terms cannot be compared to an interest rate denominated in %, they are linked but your sentence still doesn't make sense at all.

I think we all now owe it to the Ardern Government to give them heaps of credit for fixing what the previous governments failed to acheive

Labour have not fixed the housing problem whatsoever, (remember they promised 100'000 affordable homes?) in fact prices, under J Ardern, have climbed much more than under the previous government.

if Jacinda's Government will now just isolate those traitorous anti-vaxxers in leper-like colonies we will have truly lead the world and Jacinda will go down in history as one of the world's great stateswomen

You suggest to isolate traitorous anti-vaxxers in lepper-like colonies… really ??? You wrote that sober ???  (btw I'm vaxxed) 

Are you happy with my more detailed reply now?

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What is your investment strategy from here Yvil?

You seem to pride yourself on your investment acumen, so what would you recommend?

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Good question HM,

I'm a property guy so I wouldn't dare comment on other investments such as shares (which I invested in, in the past and found out I was not good at), I still don't fully understand cryptos (speculative investment or life changing currency?) and I think NFT's are crazy (maybe showing my age?)

So the only segment I feel qualified to comment on is property because I have been investing in it for 25 years, commercially and residentially in NZ and overseas.  For the last 10 years or so on Interest I have been consistently debating against house price crashes in NZ, not because I want to "spruick" but because that's what I genuinely felt.  But now, I do think we're at the end of the big (30 year) house price growth cycle.  So… sorry I really don't know… If you have cash, it's not easy as high inflation will erode it but I would probably still keep it in the hope of picking up a bargain in 2022.

If you're a FHB, things are different because it's not just about investment, it's about security of tenure and pride of ownership.  If a FHB can afford it (including interest rates 2% higher than today) and I know it's very hard for FHB, I would absolutely say buy that house, there are far too many renters out there who are still renting because they thought "just wait a bit, prices will probably come down".  If house prices do go down over the next couple of years it doesn't matter much for FHB's as they will have a 25-30 yr mortgage by which time the possible dip will be inconsequential.  

Lastly a buyer is far better off spending all his/her time looking for the right house rather than timing the market.

Good luck!

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Thanks Yvil. 

So do you think it's a good time to buy investment property? You seem to be uncertain?

You also seem to suggest having cash and being ready to pounce on a bargain in the next year or so is an option?

 

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I wouldn't buy residential property as an investment now. Cashflow is non existent or negative especially with the removal if interest tax dedutibility and I think capital growth is going yo vanish. You'd have to find a house where you're very confident you can add value to, to make it worthwhile.

Commercial property is a bit different as if you're astute you can more easily create value because the value results more directly from the amount of rent. But beware Commercial property owners are more knowledgeable than residential landlords, you can just as well lose value if you buy an over rented property and you need to replace your lessee

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Sub $10m commercial is full of ex res speculators who exited their res portfolios in the last 5-10 years. Lots of money chasing <4% yields, this at crazy prices. Above $10m lots of Prop trusts, some listed, and Lawyers syndicates. If rates get back to 5-6% you stand to loose a million or three.

Summary it's no picnic either.

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yvil

"rather he's saying that there have been more than 443 dwelling (sic) than needed over the past 3 years"

Your above interpretation means exactly what I said, that "Auckland supply now exceeds demand by 443....."

'those needed' in your interpretation can only mean those needed to satisfy demand i.e. achieve a balance of supply and demand, but as Greg's data table shows we have exceeded that balance point by 443 homes.  

The rest of your interpretations are equally fallacious but it would be tiresome to give a detailed response to them all.

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Supply and demand is important but current ponzi is by fueling speculation / FOMO.

when people were fighting over toilet paper was it because of demand and supply or FOMO.

 

 

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FOMO will disappear once the emerging surplus becomes more visible.

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This analysis doesn't seem to take into account one very important factor on the demand side. This is the need to replace the many thousands of existing houses that are not of acceptable standard and causing increased health problems. I agree with the comments that the Government needs to develop an overt migration policy that requires employers to adopt productivity enhancing practices.

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Illogical proposal. They don't need replacing. They need upgrading. Not many people have the means to replace if they can just upgrade. 

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Mood on Interest is very similar to early 2019 when the Auckland market was flat as a pancake with prices being flat for a couple of years. RBNZ then dropped the OCR 50 BPs and set off the next boom. I can’t see Jacinda ever allowing house prices to fall a year out from the next election. The drop in confidence would really slow the economy down 

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You saying she can has control over the OCR? 

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(From the UK this evening. Apply that sentiment here and with our official CPI at 4.9% the OCR should be 6.5%!)

In reality, interest rates are determined by global forces that no one fully understands. If those highly-paid people in banks and other financial institutions could predict them confidently, they would be even richer than they are already. The Central Bankers like to portray an air of knowledge and calm, but they also get things spectacularly wrong. We might or might not get the first rise in official rates from the Bank of England this week, but already the markets are moving. On Friday, several banks announced that they were raising mortgage rates, and the message to would-be home-buyers must surely be to grab the loans while they last. Back in 2006 the CPI averaged 3.2 per cent. And where was the Bank of England base rate? It started the year at 4.5 per cent and ended it at 5 per cent. That is normality. Interest rates that are higher than inflation. What is happening now is far from normal.

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...yeah, but petrol at $3/l and CPI at 7% would really slow the economy down too. That may be the choice (one facing the RB more than Jacinda, but I'm sure her opinion is... taken into account by the RB...)

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Been predicting petrol at $3 a liter by Christmas in Auckland for 98 now for a few months. Not sure what the hell is happening in the world at present, take China there is suddenly a Diesel shortage and prices have gone up 30% almost overnight and many stations have run out. I think we could be facing some shocks in the near future which will really rattle the RBNZ. Its the things that occur that are totally outside of their control or ability to rein in that are of great concern.

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Great work Greg! thanks.  

How do you make the difference between a Consent which is for a new dwelling and a Consent which is for a reno of an existing dwelling (thus not adding to the accommodation pool)?  Can this be differentiated by the Councils without going through each Consent?

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The data is available as new builds vs renos

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House prices are out of reach for the average wage couple in Auckland and as interest rates are on way up with  inflation the only place house prices are going is down it’s by how much.

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I think its a bit dangerous to say supply has caught up to demand.   I agree the housing shortage is not getting WORSE over the last couple of years, but we still have shockingly high levels of homelessness and housing deprivation.  Until that shortfall in supply, that has been built up over years, is addressed, its safe to say we still have a housing crisis.

 

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Good analysis but ...

What was the situation re housing shortfall at the start of the analysis period? 

In terms of demand/supply for affordable houses, more detail is needed on the price ranges of the new houses.

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This is a bit misleading. Consents v Completions v Variation v 'Possible Cancellation of builds or Delay/Postponed?'

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"2021 looks like the year that housing supply caught up with demand - in most places, Greg Ninness reports"

Greg, So if the house price rise was due to supply shortage only as put forward by all politicians, rbnz, experts, economist......AND....not because of speculative activity supported and promoted by RBNZ and Government, house price should fall.

OR

Will now find some other excuse for ponzi and create FOMO.

 

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There is a fundamental difference between increased supply meeting increased demand, in contrast to overall supply and demand being in some sort of balance.
KeithW

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Supply alone doesn't really matter. If institutional investors buy most of the new supply and don't make them available to the market , then those institutional investors  can artificially control the supply and drip feed it out to the market, or just hold onto them. Supply doesn't matter, its supply that is available to the market that matters. 

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