Posts by Katharine Moody
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Wiki is as good as anything for my definition;
https://en.wikipedia.org/wiki/Economic_bubble
And I've always liked this graphic representation;
https://people.hofstra.edu/geotrans/eng/ch7en/conc7en/stages_in_a_bubble.html
And I'd go with the theory that "intrinsic value" of our housing stock relates to affordability - the median house price: median household income works for me.
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Speaker: Identification strategy: Now…, in reply to BenWilson,
Perhaps this will help;
BIG NUMBERS
The scale of our housing market was revealed today in the March 2015 data out from the RBNZ. The value of all houses is 'now' $791.2 bln, and that value grew by $66.5 bln in twelve months. That is value growth going up at the rate of $182 mln per day - I kid you not. (And almost all that gain is not taxed. If it was at 30%, the public coffers would have benefited by $20 bln, representing 80% of GST.)
Or this;
the median selling price in the Auckland region has risen by $155,000 (25.8%) in the last year or nearly $3000 a week.
Or this;
the average asking price in Auckland has increased ten times faster than the rest of the country
It's a bubble.
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Speaker: Identification strategy: Now…, in reply to BenWilson,
A bubble people driving prices up beyond the fundamentals.
What do you define as the "fundamentals" of a local housing market? Do you mean a measure of median house price to median income - as this seems to be the metric gaining traction in the housing affordability debate both here and elsewhere.
These folks (Demographia) have been producing a survey which includes New Zealand for quite some time. Here it is for 2014;
http://www.demographia.com/dhi.pdf
According to their calculations, Auckland has a Median Multiple of 8.2 - severely unaffordable.
But you may have a different definition or meaning when you refer to 'fundamentals'.
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Polity: House-buying patterns in Auckland, in reply to Sacha,
Yep, and he did too. Made the basis of their campaign on a return to surplus all that more despicable to my mind.
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Speaker: Identification strategy: Now…, in reply to BenWilson,
Especially since this continued right through the sub-prime bubble elsewhere, through the GFC.
No it didn’t. Auckland’s market (median house price) peaked in Dec 2007 – reduced thereafter – only regaining that peak number in October 2009. Lehman Bros went down in September 2008. That median in Auckland remained quite flat right through to the end of 2011 – and then grew steadily for the next year or so .. following the Christchurch EQ.
A lot of cash out insurance payments left CHCH and headed to Auckland – but these purchasers weren’t the type to pay way over market value. Hence we recovered from the GFC fallout largely because of the CHCH disaster (well that’s my theory anyway) and Auckland remained more expensive (but not in the stratosphere)..
The Auckland market went ballistic (in comparison with the rest-of-the-country) toward the end of 2013.
Chart data is here (click on Auckland tab and then use the slider to get the span on the period above);
http://www.interest.co.nz/charts/real-estate/median-price-reinz
It is a credit squeeze/default event (again) that will deflate the bubble – a local bank problem/crisis. We are a way over-indebted nation (private debt in particular) and we haven’t got the shadow banking sector here with the type of bets made on free money – so we are at the whim of foreign masters. The speed and momentum of our reckoning will depend on whether unemployment grows rapidly, or not, with the recession we are presently facing. When locals can’t meet mortgage payments, no matter what foreign country-of-origin is buying – they won’t be paying the premium they are now – that is for sure.
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Polity: House-buying patterns in Auckland, in reply to David Hood,
Agree – my perception is that the opposition collectively have been driving government policy for a few months now. Winston’s win in Northland really giving the other side of the house a collective confidence boost.
JK called the election early for a reason.
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OnPoint: My last name sounds Chinese, in reply to chris,
I was booted off the Action Station mailing list for providing too much feedback when prompted, feedback along the lines that stopping the advertising of junk food doesn’t really begin to address all the junk food that isn’t advertised
Do you mean they blacklisted your email address? Or are you talking about an Action Station public forum? Curious as I'm a member/contributor and have found them really good people.
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Speaker: Identification strategy: Now…, in reply to llew40,
If I had the capital to invest, I would probably have done the same over the last few decades.
You might well be lucky you didn't.
When most people say they have "the capital to invest" - they normally mean they have "the capital to borrow". Our borrowing here in NZ - no matter what ethnicity or age or intention is pure madness;
The scale of our housing market was revealed today in the March 2015 data out from the RBNZ. The value of all houses is 'now' $791.2 bln, and that value grew by $66.5 bln in twelve months. That is value growth going up at the rate of $182 mln per day - I kid you not. (And almost all that gain is not taxed. If it was at 30%, the public coffers would have benefited by $20 bln, representing 80% of GST.)
Auckland is a bubble that will soon pop dramatically. It will be bad for all of NZ, but far, far worse for those piling in with borrowing of late.
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OnPoint: My last name sounds Chinese, in reply to BenWilson,
61.7% of the sellers in the data were Euro, but only 56% of the population, and only 40.7% of the buyers.
Did they do any breakdown of probable ethnicity for sellers beyond just 'Euro'?
On the matter of foreign direct investment, I'm thinking a lot of that might well be parents of overseas students buying because they want to house their children while studying. That is a completely fair thing as many local landlords don't want to rent to students (we had this same problem when one of our sons wanted to study in Tauranga - and we bought as it was just plain necessary).
To address this problem in a win-win way for both NZ and foreign direct investors, what is needed is a government mandated investment by tertiary institutions on student accommodation (based on a percentage of their undergrad rolls), coupled with a mandatory requirement that those on a student visa must live in such student accommodation for (say) at least the first two years of their university study.
When I attended as an undergrad at uni in the US - this was a mandatory requirement of all students - I assume, to ensure the student accommodation owned by the Uni maintained its occupancy.
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Polity: House-buying patterns in Auckland, in reply to BenWilson,
You're right - that point was initially an over simplification.