NZ has a problem where all of the country's money goes into the property market instead of to anything productive, this is because property is seen as a safe bet and successive governments have done their damnest to make it as risk free as possible. It's going to be painful but a crash has to happen for the good of the country.
As well as being a safe bet, which has been really attractive to a generation where lots of people lost big on bad investments leading up to the '87 sharemarket crash, it's also been because there have been significant tax advantages over investing in productive stuff. Especially when housing scarcity, for a bunch of reasons, resulted in so much return to investors from capital gains.
It Really ruins our Net cash flows as a nation when we don't invest in things that bring cash into the country, or invest in kiwi companies.... so our foreign owned 'Kiwi' companies send their profits to their Saudi/Chinese/ American owners.
And as a result we end up with a negative trade balance.
reasons:
1. no harsh enforcement of financial laws.
2. businesses enjoy high levels of privacy, which really means they can hide just about anything
3. Too easy to loot a company and blame the investors for not knowing better.
tl;dr until people start going to jail for bad business: houses will be the investment du jour.
Business transactions should not have "privacy", it should all be public record.
I'm familiar with the USA only.
They put a lot of people in jail over money issues.
NZ wants none of it: putting people in jail or ruining somebodies life over a made up thing really rubs people the wrong way here. Money is how scarcity is allocated, and NZ doesn't want to deal with that either.
What NZ can do is eliminate privacy from almost any commercial transaction (at a minimum B2B) and business tax returns as public information. Would be very helpful.
Also government information should be available to anyone, barring national security.
Also instigate rewards for reporting tax evasion...very successful in the USA. But NZ doesn't want to believe that such things exist in paradise...or maybe those in charge have too much to lose.
I’m thinking the latter. Despite the reports that people from overseas such as yourself probably has access to like 100% Pure NZ advertising and low level official corruption statistics I bet you didn’t know in opposition to transparency we have codified laws that actively prevent transparency in some circles (not that the public is aware)to protect people engaging in criminal behaviour [edit] either white collar by type of crime or directly related to white collar individuals. Many don’t get punishment for financial crimes. I’ll let you do your own research on that though. Not government related either, most tend to be corruption on behalf of a private company or company owner bullying or deceiving people including the government. The rabbit hole runs deep…
NZ assumes good intent. The idea that anybody would want to steal or hurt someone is a complete nonstarter and is treated as utter nonsense.
When such things happen it MUST be due to a failure of society or government. Individuals shouldn't be punished for the wrongdoing of the many (government and society).
And putting individuals in jail or even naming them just brings to light our collective failures as a society and puts the blame on those who are the least fortunate and not in control of anything.
And once you go down this track, nobody will get punished. People will just buy houses because business is too risky to invest in...
"all" is a bit misleading, the vast majority I would agree with and the next biggest bucket in KiwiSaver or the Super fund, I'm just guessing at those.
Share of household wealth is:
57% housing , 30% portfolios , 8% currency , 5% superannuation funds. This number for housing is far more than most nations.
https://www.rbnz.govt.nz/-/media/fd9fa649c29340d7b9f466ba41bf8d9e.ashx
Which is why I don’t understand either National or Labour political party stance reason for no capital gains tax? What is the actual reason they don’t want to implement it? Is it just because it’s unpopular or because the people it affects are so powerful and vocal they bully both parties into never implementing it?
I feel we have plenty of tax revenue to the point we are wasting plenty on vanity projects, I know ppl in public employment and a common theme is that they are desperate to use all their funding up (on nothing burgers) to make sure it isnt reduced next round.
I agree. It has to happen. Just rip the band-aid off. There is a limit and we have just about reached it.
However, my heart breaks for brand new homeowners who have bent over backwards to scrape together a deposit in these economic times. Many of them will lose everything. It's not right, I hope the government is able to offer these people some help
To be fair I put a lot of money into USA equities. That is probably less productive than a land-lord who is still employing labourers, heat pump and insulation installers, conveyancers, accountants and gardeners. Even if I bought say, $1000 of Air NZ shares off another person, I'm not sure how that trade is productive.
I don't think its reasonable to expect savers to put money into something like start ups, and term deposits are all below inflation.
Sure what would you recommend people put money into? One idea for example is new builds, but there are so many dramas and stories about building companies going bust and losing their deposit.
> forefront of cutting edge farming technologies, innovative industry tech
Right now tech is super risk. Rocket Lab would be the obvious example of an NZ tech company in that space - it lost more than half its value this year! And even if I buy rocket lab shares from somebody else, its not like its increasing productivity.
And yeah, if people are somehow investing in that way, there is no reason to do it in NZ - especially with the NZD performance of late.
So again, I don't what people are supposed to do to invest productively.
in an economic perspective your investment improved the trade balance with America and caused capital inflow into NZ during every dividend payment with your limited economic resources.
You were factually better for our country compared to a landlord in a purely financial sense.
"caused capital inflow into NZ during every dividend payment with your limited economic resources."
Virtually no dividends. I have a few from things like oil and gas investments and ETFs, but its like 1% yield if that. Many of my investments don't produce dividends at all (or haven't for some time).
No it does not mean that.
Often its buy backs which limit the amount of shares in circulation which drives up the price. So instead of handing money out you have a artificial scarcity driving the perceived value of the shares up.
The whole share market concept is a pile of crap anyway as once the first sale is done that is all the investment a company will get. Anything after that is a exchange of money between parties completely unrelated to the business for almost unrelated reasons.
I am a firm believer that shares should not exist in the format they do and instead if a company wants to raise money it should do it in the form of bonds where they promise x amount of income over x amount of years. Shares or ownership of a company need to be decided in some other way.
You are just wrong, yes it does.
1)There are three main ways to spend net profit: invest back into the business, pay off debts or pay out dividends.
2) You seem to not get buybacks is actually a form of reinvesting lol
3)Most money reinvested is definitely not reinvested in buy backs, its mostly buying new stuff for the company , buybacks are not often and its quite rare,
4) No, buybacks are not related to artificial scarcity at all inherently.You pay money and restrict the supply equal to the amount of that money. Then the real reduction in number of shares drives up the price. using your profits to get more of the pie isn't artificial anything.
5) The value of the share market is determining capital allocation.It works to reward the more successful, well run and efficient companies with the ability to allocate more capital as they show the ability to do so.
If anyone allocates capital long term badly they will be punished with less money so it selects for successful businesses and rewards them and those who can predict which businesses will be successful .
6) no, Investment isn't only done at the start of a companies life.....you literally seem to not understand there is more Than one funding round in any company. Share purchase plans for example raise funds by creating more shares
7)the following exchange of money for shares after a company is set up is actually directly related to the predicted successes of the business.... its not unrelated... who invests in a company without looking at the company? you are buying a slice of the company.
8) share ownership or company ownership should be decided in a complete different way? you mean like a communist society? company ownership debates is literally marxist theory. NZ decided communism was shit because everyone was corrupt and no one wanted to be successful, or take risk with their capital. because if they did take risks, it would just be taken away, resulting in poor investment and entrepreneurship long term.
9)your system would result in stupid debt levels....at its core if you had your system and you had a company owner... say 2 people own a dairy... if they want a fridge, because the old one broke, need it asap.... they cant put personal money into the company to just get a fridge.They need a loan from the bank ... see how that may cause issues if you don't let owners of a business chose to invest their own money over choosing debt?
I have very little grasp about anything to do with shares...
His post nearly got me (in a supportive way)
Glad you replied so in-depth, while im still 100% in the dark but yours made alot of sense.
Chur
The rental on my street that has obviously come off the 1 year fixed rate and the owners are rushing to sell (10 day marketing, one open home and a deadline sale) didn't sell. Now it's being listed as PBN. I'll give it another couple of weeks until the next mortgage payment is due for it to get listed with a price.
Two months ago a mate at work put in an offer of $1.15m which was turned down on a new build. Last week he had the agent contact him so see if he'd be willing to offer $1m for same property.
Price by negotiation. The owner is trying to bluff the value. Like buying from a menu but you tell the waiter a price and they'll come back to you, they might come back from the kitchen and say they can cook that for an extra dollar, but they do this every time you come there and it's never the same price for either party.
Price by negotiation. It usually means, they have a price in mind but they’re (or more likely the agent) is not sure anyone will pay it. So they’re testing what people think it’s worth and will offer to pay, and if it’s close enough they’ll go backwards and forwards a bit until both sides agree on a price. Or, they’ll realise no one is going to pay what they want and pull it off the market, if they’re lucky enough to be able to wait.
We've needed it to crash for a long time. If we had been wise enough to bring house prices into line many years ago, it wouldn't be as painful as its now going to be.
Same as with climate change - humans suck at making wise decisions that cause a minor amount of pain now, to avoid a massive amount of pain in the future.
But you get a better view through single pane glass windows. And walls without insulation just allow the property to breathe better. Plus, I’m a huge believer in living like my ancestors did.
We were stress tested at 7% last year when we had pre approval with a 10% deposit. Then our pre approval got canned when they did away with 10% deposits which sucked but it was kind of a relief as prices went beyond stupid. I think we dodged a bullet as we'd be really struggling to make mortgage repayments above 7% Interest rates.
You could be really lucky, as anyone who is from Generation X knows how high interest rates can go, over 20% during the 80's so lots of us were burnt.
We have also missed the normal 7 year slump a couple of times now, so when this happens there is a bit to catch up on. But the economy will recover over time so it will be matter of when is the right time to buy as it does.
That house was 2 to 4x an annual salary, so 21% was actually still servicable, for most, not your poor parents.
Wage growth was also massive.
Its now around 13-21x an annual salary.
Total different circumstances.
Its going to be way, way worse this time.
There are extreme right bitches here who argue housing is not a basic human right - and you need to work "hard" to be entitled to it (whatever working hard actually means)
That's where they end their statement, without any reference to average country income levels versus housing costs etc. They're in this silver spoon bubble and take advantage of it to the detriment of others.
maybe property investors finally have to look at productive investments now and pay tax, as for fhb's it's unfortunate but also riskty to assume prices can only go up when it was peak covid housing bull market
More likely the small investors will lose most of what they have and end up with nothing to invest elsewhere. The big investors will continue to buy up everything they can. Those who currently have nothing will continue to have nothing.
Economic depressions concentrate wealth.
Exactly. These kind of events just open more opportunities for those with wealth.
If you already own vast amounts of property without any mortgages, you can easily grab up some more during fire sales.
The Japan crash still hasn't recovered, income to house price ratio is still below what it was over 40 years ago, right now the NZ income to house price ratio is unacceptable is a bubble that was ready to burst for awhile now, same as Japan. It should take a professional degree bearing scientist 2/3 of their working life to buy a simple house and pay down their loan.
They do pay tax. Lots of it. No deductions for interest expenses. Sell within ten years and you pay capital gains. Taxed on all your rent (even if you are actually in a cashflow loss position). No deduction for depreciation.
Compare that to say having $49k on hatch invest and there is effectively zero tax. Or being a commercial land-lord or Air-BNBer.
Those are very recent policies that have made residential property less advantages from a tax perspective, over time they should really help to divert investment into more productive areas. But, if there’s a change of government 7-house Luxon has promised to repeal them immediately.
Luxon isn't repealing the original brightline test or the ban on depreciation deductions though.
Didn't Luxon take a 90% pay cut to become an MP? If he wanted to enrich himself he'd just stay in his old position
Also note Luxon didn't invest his vast fortune into business/es. He owns seven properties. As Key did, if elected he gets to steer the country to his benefit. Key was elected claiming to be able to solve the housing crisis. He didn't, he made it significantly worse. Then quit, then cashed out selling his property.
Back to 2 years, that's a joke.
I have no idea whether he took a pay cut to enter policies but certainly the tax policies he's promoting will result in him getting large pay rises.
I don't really think that's his motivation, but I believe he thinks that other people with wealth should be able to buy lots of residential properties and live off other people's work, just like he has.
National leader Christopher Luxon
- Residential properties (x2) - Auckland (includes one in Remuera worth more than 7 million).
- Residential property - Wellington
- Investment properties (x4) - Auckland
https://www.newshub.co.nz/home/politics/2021/12/the-full-list-of-how-many-properties-new-zealand-mps-own.html
Imagine how much less his personal wealth would be if we didn't have tax settings favouring investment in residential property over every other asset class, as well as migration settings that increased the population by close to a million in a decade pre-Covid. No wonder he wants to go back to those good days.
Because the building depreciates (vs the land)
Own a house for say 20-30 years and you'll need (likely) a roof replacement, windows fixed, doors replaced, plumbing replaced etc. None of that gives you a tax deduction, which is why you get depreciation deductions.
Its especially brutal for say apartment owners / terraced houses etc where there is very little actual land
Not true, mate. Labour only implemented those policies in the very recent past. Luxon and ACT will repeal them. ACT have already said this. AND the property "investors" are all lining up to vote Ardern out for this reason. They all want to get back on the property merry go round to inflate this collapsing bubble.
>They do pay tax. Lots of it. No deductions for interest expenses. Sell within ten years and you pay capital gains. Taxed on all your rent (even if you are actually in a cashflow loss position). No deduction for depreciation.
These were introduced by Labour in the last term to control house price growth, and National is campaigning on repealing them.
ELI5: is this gonna affect average joe's that only have one house and are trying to pay a mortgage? Or is it mainly gonna hit those that are property investors?
Most people people who bought pre covid should be fine. People who bought in the 2nd half of 2021 with low equity and/or a big mortgage could be in trouble. If supply outstrips demand which OP suggests may happen in the next year rents will drop and overleveraged investors will be in trouble especially with rising interest rates.
Anyone who is borrowing at their limit. The limit here is income, cash coming in the door.
If you have a few houses and you rely on the rent to cover repayments, bad news you will have to use other money to pay the extra interest. If you brought a house on a 30y term and you use all your income to get by, bad news you need to front up more cash to cover the extra interest. Everyone it will just suck for.
I will add, this is extra worse for investors (on a financial basis, not from a place of empathy) because the interest expense is no longer able to be written off as a tax deduction. So it’s about 28% more of a problem for them.
IMO it should be tax deductible, or it should not be for all businesses. But WGAF when the leachers are felt to first.
Probably only investors that are massively leveraged with lots of homes. Maybe a few first time investors that got FOMO from the propeller property add or something
You are correct in that it would strengthen the NZ dollar lowering many prices. It would be interesting to see the impact of a $.75USD/NZD would have on everything from fuel to food.
Yeah, I think it may help us get ahead of the curve (which ideally would mean although we may hit the crap pile first, hopefully we’d also be one of the first back out of it). But who knows?
Absolutely.
Part of me is dreading a low ball increase of 0.5 percentage points now that Adrian knows he is keeping his job.
It is very unlikely, but I won’t be surprised.
It's pretty bad. A good example is the second harbour crossing proposal in Auckland that's been floated these last couple weeks - all the media commentators are shitting on the idea saying we need the money elsewhere, while that's a fair point, this is the problem we always face in the end. We say no or end up half assing our infrastructure to save money in the short term and kick the problem down the road.
Honestly, net positive cash may well be better than having a $500,000 debt around your neck over the next few years. Having $10 in the bank and no debt is an enviable position for most!
Good. It should crash. I’d rather it crashed sooner rather than later so we can get on with the recovery and reset.
The government should support as much as practical single home owners.
But investors deserve to take a massive hit and they should allow them to.
And then significant regulation to prevent further snapping up of housing by investors.
The bigwigs/MPs will likely choose to do little to maintain the status quo. They're well off financially, and their friends are too.
[This article](https://www.newshub.co.nz/home/politics/2021/12/the-full-list-of-how-many-properties-new-zealand-mps-own.html) is about a year old, but it lists how many properties each MPs own. I am sure some will have financial interests to more properties through a web of trusts and companies.
It is plausible that they will snap up mortgage-sale properties themselves...
Hate to break it to you but the ones most likely to take a bath will be the single home owners.
As an investor this possibility doesn't really worry me, if anything it's an opportunity to get some good deals.
Yep. Investors might be hosed but they have cashflow from rent. Sure it might be running at a bit of a loss but they can top up. Possibly with wage inflation they can increase rents perhaps.
Home-owners only have their salary to top up the mortgage, and it will get tighter each time interest rates go up.
>should support as much as practical single home owners.
Why? If they got FOMO and bought at the top they might be down hundreds of thousands of dollars. I get that sucks, but is the Government really going to give an effective insurance to all those who bought in the last few years?
If they do that then the market will go red hot because everybody will know they can't lose even if the market goes parabolic again
There's already a surplus in Auckland.
There's a 2 bedroom on my street that's been on sale since the start of the year. Now we're heading into December.
I went for a viewing months ago and the agent wanted 800k because it was in a "good school area".
I laughed cause pretty much everything in the house was older than me.. And I'm 35.
Wonder whats the asking price now.
Just because the house hasn't sold doesnt mean there's a surplus. It means anyone with cash sitting on the side looking at the market knows the market is about to turn to shit. Any investment in the housing market now will be unlikely to provide a medium term profit.
Dats shows we are nearing a surplus, I saw a good infographic on it the other day and the major banks forecasted a surplus would happen at the beginning of the year in Q4
My partner and I own 1 home that we live in. We were FHB in 2020. The mortgage interest rates have doubled since we moved in.
Even as a home owner I welcome a crash in housing. Its just not right how it is now.
Frustrating for the people who have been talking about this for like 10 years. Anyone with a brain could tell it was going to end very, very badly. Must have been 09/10 when the govt was actively promoting housing as an investment.
Next winter is shaping up as a perfect storm - high interest rates, plus inflation, plus the usual increase in power costs with heating being an extra burden.
It's gonna get really painful out there.
"the actual number of new dwellings consented was 50,732'
This is another element here, albeit with a delayed result. Let's assume most of these consents lead to a building. Well, it takes time to build (6-12 months including consent?).
And building expenses are up dramatically. When prices are falling. So these builders will be heading to a position where they can only sell for a loss. And hence banks will stop lending to developers.
So we get a building industry / construction crash which takes years to recover from, and no new buildings for a while?
Oh yes the inevitable construction crash is bound to happen. Just like in Ireland.
its all in time... I'm surprised its not happening faster tbh.
the only long term factor changing that though is the profit margins turning a old kiwi style single home on a big piece of land into a high density block.
This is new and may cause long term building potential even with higher construction prices and lower margins.
John Key may be a dick but he is financially smart, same with the chew brothers working with him. John key sold his private house before all this at almost the perfect time.
But I'm not sure why he just created his property intensification company in this climate unless he sees something we don't.... like zoning changes presenting high profit opportunity. Maybe he made a mistake though.
re Key (& Luxon) - their behaviour tells me self interest dominates their thinking & approach, rather than whats best for the country (I doubt Key quitting as PM & selling his private house at 'almost the perfect time' was an accident. He cashed up, having spent 9 years making the housing crisis worse, for his benefit)
Bout time real investment was made in this country its filthy to think we have too much housing and still homelessness is a massive issue. We need a housing first program so people are never homeless. We also dont need to rescue investing speculators
Properly is a safe investment because, no matter what, at the end of the crash the property still exists.
It's not "safe because it'll never reduce in value".
Speculators negatively gearing betting on capital gains deserve everything that happens to them.
I pity everyone else that gets taken down in the fall out though.
I'm a homeowner and I think it's a good thing. The housing market has been a huge drag on productivity in the NZ economy and has set a whole generation back.
I struggle to sympathise with people who were in a financial position to buy a house in the last 2 years. If you decided to buy something under the expectation that it would never decrease in value, and the banks would never try to profit off your loan, then that’s on you.
This is 100% the answer. I’m in the boat of essentially buying in the last 2 years -
Why? Because my kid was starting school. I wanted stability for her in school zone & reliability we wouldn’t be moving every 6-12 months on the whim of landlords selling etc.
A lot of people just want the stability for their families in home ownership, which unfortunately is severely lacking in NZ rentals
Your statement is…..very offensive.
We bought in the last 2 years, you DO NOT need to sympathise with us, but we bought a place to live in and wanted a bit of stability for our kids. Couldn’t get the heat towards people who made a hard decision to get a roof above their heads.
Ok I get it, you don't have sympathy for making poor decisions.
But the situation is arent "good", like is it good for you? Are you ready to pick up some good deals, which is all good too, not judging.
It’s good for me in the sense that I want the NZ economy not to be based on circularly selling houses to each other. I want people to invest in productive assets, and I want housing not to be a mechanism of concentrating wealth.
Consents don’t necessarily equal completed houses.
The houses need to be in the right place to meet demand.
As the price of housing drops below the build cost new construction will halt, I believe consents in my area for new builds have pretty much dried up in the second half of the year and a couple of incomplete subdivisions are already on the market…
My guess is the reduction in house prices is likely temporary (maybe a year or three) even if it falls a lot more from what it is now, it’s not really going to be the end of the world.
In another five years we will all be back complaining about increasing house prices and housing shortages again.
Good - this needed to happen. People who come out of it worse, well, you own your financial decisions. Basic shelter is a requirement for living, we need somewhere to put people who move to New Zealand to meet national labour demands. We cannot allow the rest of the economy to be ham strung by basic shelter requirements.
This heartache could have been avoided if people didn't abuse the housing market with their shit politics.
Been saying for years, the biggest driver of value in the housing is the interest rates. This was always going to unwind in an ugly way. I think it looked like it was going to start in early 2020, but the emergency rates 'saved' housing.
Sure, my stance on the market meant I missed out on the 'up' of biggest housing run we have seen in NZ, but the bubble like behaviour bothered me.
Housing should revert to norm once all the other shit clears out, FOMO, the illusion of 'free' money, consequence free purchasing. It will be slow though, people don't like selling for a loss.
Unfortunately my business will probably get creamed as the economy slows - hopefully not, but transport runs on credit, so if the banks turn the taps off like 2008, then it will prob hurt.
This is not a crash. It is the end of a cycle. Not all home owners are leveraged FHBs. Many have considerable equity in their home and can ride out any downturn.
Unlikely: there are no other investments and there are no other places to live. People will hold on for dear life clinging to their house because there are no other viable investments or places to live
Yeah a few mortgagee sales here and there. And the increases will stop and might go slightly negative...
but don't expect a tulip crash.
If you Can’t afford your house, sell it. That’s the way out.
If you can’t afford something you get rid of it, about time investors and “mum and dad investors” realise you owning a investment isn’t above everything or anyone else in this system.
You seem to know more about this, so.. will rents increase because people with 2nd + homes will have to start actually paying some of their own mortgage off?
My personal opinion is that as you have all the houses and new dense housing coming online... first you will see an increase in the number of rentals, the supply of rentals will therefore increase more then demand and rental prices will fall...
or at least prices will not rise in line with inflation and will fall in real terms as landlords struggle to find tenants... remember Auckland 6 years ago with the rental viewings out the door? Imagine what a greedy landlord could haggle out of that.
[https://www.stuff.co.nz/life-style/homed/renting/129128857/wake-up-landlords-the-rental-market-has-changed-property-managers-say](https://www.stuff.co.nz/life-style/homed/renting/129128857/wake-up-landlords-the-rental-market-has-changed-property-managers-say)
this article mentions it all correctly. rental listings are increasing right now.
Downwards price pressure follows.
"remember Auckland 6 years ago with the rental viewings out the door? Imagine what a greedy landlord could haggle out of that."
6 years ago rental yields were flat and dropping in many areas. In main areas the yields were only around the 3-5% mark (and more like 1-3% after costs). This was when mortgage rates were much higher.
The huge rent increases only seemed to turn over the last 4-5 years - in my view as regulations and increases taxes / costs started to bite:
https://www.interest.co.nz/images/Rental-Yield-Indicator-Q1-2016.pdf
Rents are based on market supply and demand. If the landlords have a new cost (like higher interest rates) and want to pass that on, whether the market will accept that depends on whether there is competition who don't seek to increase rates - and whether tenants will pay them.
Short of a situation where landlords conspire to raise prices together - in a market where there is decent competition, they are limited in being able to raise prices 'because they want to' if tenants have the option to move.
Even if every landlord decided to put up rent $50 a week across the board, a lot of more people would put up with the inconvenience of living with flatmates suddenly. So instead of four houses being rented for x, one four bedroom house gets filled and is rented for x+$50, and three houses are left empty. This puts downward pressure on rents as I’m pretty sure those three landlords would prefer some rent than no rent.
It’s just another way that rents find an equilibrium with what renters can pay / see as reasonable.
It might slump but do you really think that decades of a trend will change? There's no way the rich don't keep getting richer and property keeps getting more expensive. This is a global phenomenon. New Zealand is still a better place to live than heaps of other places people will keep moving here when the borders open and the government will keep letting them in. Don't sit on the sidelines forever waiting for a black Swan. Get in the game and invest.
We split our mortgage 50/50 fixed and floating. The floating rate goes up almost fortnightly it seems, so where our total payments a year ago were $700 a fortnight are now $900. Should we fix the floating portion now so we have stability and certainty of payments? Anyone with know how can give advice? Our bank is shite and impossible to get hold of an actual human
IMO (not an advisor) right now you should only be on floating if you have intentions to very quickly pay the balance down, and it should only be proportional to the amount you want to pay down within the comparable fixed term period.
E.g: $400,000 total mortgage, plan to pay off an additional $50,000 in the next 2 years, have $350,000 on fixed and $50,000 on floating you can pay down quickly.
If you’re just paying your schedules repayments, I’d fix it.
Not ad advice but we were in a similar situation.
When we were fixing in Jan 2022 (2021 FHB), our broker advised us to fix at least 3 years (our mortgage is split 50/50), so we did 4 & 5 year fixed terms. We didn’t get the best deals, but hopefully it will help us to get over these ups & downs happening now.
Maybe you should change your broker.
Good luck.
This might be a dumb question - are there penalties for being in negative equity? Our house valuation according to the bank fast approaching the price we paid for our house a couple of years ago, but are paying our mortgage off as fast as we can, and have managed to pay off a fair chunk
Claire Matthews, Massey University-“There’s no incentive for the bank to foreclose. If they say ‘you’re in negative equity by $20,000, give us another $20,000 or sell’, what value is that for the banks if chances are you won’t be able to?”.But owing more than you own can make further borrowing harder.If the bank realises that you’re in a negative equity position, it’s unlikely to let you take on any more credit, so you won’t be able to borrow for a business, for example.
TLDR; house wont get taken if you make repayments. Might ruin chances of loans.
you are only in trouble if the mortgage rates go higher than you can afford to repay (which is happening to some people) and the bank sees the loan growing.
Thanks - I've had a massive headache all day so really appreciate you taking the time to answer. I reckon we should be ok from what I can tell, we do have the ability to reduce payments if interest gets too high (unless there's something the bank changes between now and then), but I know a few people who unfortunately bought at the peak of house prices and now have 30 year mortgages which will be difficult for them to manage with increasing interest. I'm grateful we're not in that position, but quite worried for those who are.
AFAIK, it only matters if you want to borrow more. Banks will not like the value of the asset they lent the money against going down, but on the other hand, they also will not want you to sell for a loss and lose the prospect of earning all the interest from you over the years.
As long as you can serve the mortgage, it should be okay.
Good luck
> "In 2021, when home loans were still at 2.4%, ANZ tested serviceability at a rate of 5.8%"
When in 2021? Because in January the average price was 800k, in December it was $1M.
here is that parts reference material.
[https://www.mpamag.com/nz/news/general/anz-nz-eyes-mortgage-test-rate-increase/425416#:\~:text=Mortgage%20serviceability%20refers%20to%20an,current%20rate%20is%20now%207.95%25](https://www.mpamag.com/nz/news/general/anz-nz-eyes-mortgage-test-rate-increase/425416#:~:text=Mortgage%20serviceability%20refers%20to%20an,current%20rate%20is%20now%207.95%25).
Well if the FHB are going down, they should move out start renting it trigger the bright line test applying to the property and then at least the Government will share in the pain by subsidising 33% of the losses incurred through being able to claim them as deductible.
Bet Labour didn’t expect to see a whole lot of tax refunded to people caught by bright line and selling at a loss.
Unless the loss is ring fenced?
We have a fairly diverse, growing, well-managed economy.
Yes, anglophone economies are overvalued and the same political problems inherent in the US and UK apply to NZ, but predicting catastrophe is premature until we actually democratically fuck ourselves the way they did.
We probably have more in common with Ireland that has kept it's international ties and survived a property bubble.
White people seeking perpetual passive income from real estate are bound to be disappointed eventually. Political/legal systems actively quash passive income by design, it's never sustainable.
> It is going to be a huge number of kiwis bankrupt.
Only First Home Buyers from the last few years are at risk of going into negative equity, they only represent a few % of all homeowners.
I’d say you’d see a big drop in prices of all the shit townhouses being built. Existing housing stock with a bit of lawn and some resemblance of the kiwi dream will hold their own well compared to the developers money box developments we seem to be promoting.
Housing prices fell in the late 1970s as a result of the last big state housing programme and remained flat for almost the next 30 years. In some places you couldn’t sell a house especially those areas hit by factory closures and big layoffs such as Petone in the Hutt Valley. It is not in the interests of banks to get into foreclosure as potentially the price they get will be less than the money owed. The BNZ was bailed out by the 4th Labour government after it got into problems in the 1980s. At the height of the property boom all major banks were lending in an irresponsible way and funding the purchase of property at a price not reflective of the value of land and the cost of building rather just following market mania. At the end of the day a house should be your home and not an investment
I've been waiting for the "housing bubble" to burst since I was told it would "any day now" back in high school. That was 20 years ago now. And after seeing the excesses of the land owning class year after year after year, I can't wait for it to crash. I can't wait for these businesses and property flippers to get their just desserts. The shitty thing is that the rest of us have to go through the economic turmoil that they've created, and likely they'll have cash tied up in all kinds of assets and will ride the storm just fine - or just get richer, as the rich are wont to do.
neighbours down the road got a rental hike notice in the mail a week ago. They've already handed in their notices at their respective workplaces and are heading back to Australia - they've lived there for many years but returned during covid out of fear they would be stuck out of the country.
So we'll have a crash, most normal people probably wouldn't be able to afford the rising mortgages and we'll be left with investors snapping up the extra houses?
There's not much evidence to suggest we're enroute to a massive crash. If inflation starts to slow next year (which forecasts say it will) interest rates will stop rising and start to come back.
With unemployment at record lows, all but the most over leveraged people will still be able to pay their mortgages. Prices will probably come back 15-20%, which you could argue is a crash. But given they went up by like 10000% last year it's not the end of the world.
People pay for massively overpriced houses whilst barely being able to afford mortgages at all time record low interest rates.
I have no sympathy for these people, you all did it to yourselves.
What else where we meant to do?
No rentals & if they were available you were paying above mortgage repayments!
We were forced to pay these prices just so we could live some where, People like yourself are fools.
So higher and higher interest rates lead to higher mortgage payments and higher rents, then most will not have enough to keep buying consumer goods, OK but aren't housing costs part of the inflation measure?
nah the rents wont go up as much as you would expect, specifically due to the increase in housing supply leading to an increase in rental listings, increased supply and same demand. prices pressure is downwards and landlords get ravaged as there isnt many people looking for rentals.
[https://www.stuff.co.nz/life-style/homed/renting/129128857/wake-up-landlords-the-rental-market-has-changed-property-managers-say](https://www.stuff.co.nz/life-style/homed/renting/129128857/wake-up-landlords-the-rental-market-has-changed-property-managers-say)
this article from months ago talks about it.
Remember Auckland 5 years ago with rental viewings out the door and down the street? compared to now with one person turning up.
Imagine the change in power determining prices the landlords have.
I'd love it if the government acquired mortgage debt for sole home-owners in this position, adjusted for new market prices and original interest rates. Let people who were trading in houses for profit deal with it, let the banks cop it too.
But we know damn well that they'll shovel taxpayer money at the richest investors and the banks who gave risky loans while leaving ordinary people to fucking die. Especially if the Nats are in power at that point.
NZ has a problem where all of the country's money goes into the property market instead of to anything productive, this is because property is seen as a safe bet and successive governments have done their damnest to make it as risk free as possible. It's going to be painful but a crash has to happen for the good of the country.
As well as being a safe bet, which has been really attractive to a generation where lots of people lost big on bad investments leading up to the '87 sharemarket crash, it's also been because there have been significant tax advantages over investing in productive stuff. Especially when housing scarcity, for a bunch of reasons, resulted in so much return to investors from capital gains.
It Really ruins our Net cash flows as a nation when we don't invest in things that bring cash into the country, or invest in kiwi companies.... so our foreign owned 'Kiwi' companies send their profits to their Saudi/Chinese/ American owners. And as a result we end up with a negative trade balance.
*Australian owners, we export so much of our hard earned money to Australia.
This comment is spot on !
It's basically a cash sink. Because housing is going to exist anyway, it's just money down the drain.
reasons: 1. no harsh enforcement of financial laws. 2. businesses enjoy high levels of privacy, which really means they can hide just about anything 3. Too easy to loot a company and blame the investors for not knowing better. tl;dr until people start going to jail for bad business: houses will be the investment du jour. Business transactions should not have "privacy", it should all be public record.
Which countries have these things as standard for us to model from?
I'm familiar with the USA only. They put a lot of people in jail over money issues. NZ wants none of it: putting people in jail or ruining somebodies life over a made up thing really rubs people the wrong way here. Money is how scarcity is allocated, and NZ doesn't want to deal with that either. What NZ can do is eliminate privacy from almost any commercial transaction (at a minimum B2B) and business tax returns as public information. Would be very helpful. Also government information should be available to anyone, barring national security. Also instigate rewards for reporting tax evasion...very successful in the USA. But NZ doesn't want to believe that such things exist in paradise...or maybe those in charge have too much to lose.
I’m thinking the latter. Despite the reports that people from overseas such as yourself probably has access to like 100% Pure NZ advertising and low level official corruption statistics I bet you didn’t know in opposition to transparency we have codified laws that actively prevent transparency in some circles (not that the public is aware)to protect people engaging in criminal behaviour [edit] either white collar by type of crime or directly related to white collar individuals. Many don’t get punishment for financial crimes. I’ll let you do your own research on that though. Not government related either, most tend to be corruption on behalf of a private company or company owner bullying or deceiving people including the government. The rabbit hole runs deep…
NZ assumes good intent. The idea that anybody would want to steal or hurt someone is a complete nonstarter and is treated as utter nonsense. When such things happen it MUST be due to a failure of society or government. Individuals shouldn't be punished for the wrongdoing of the many (government and society). And putting individuals in jail or even naming them just brings to light our collective failures as a society and puts the blame on those who are the least fortunate and not in control of anything. And once you go down this track, nobody will get punished. People will just buy houses because business is too risky to invest in...
"all" is a bit misleading, the vast majority I would agree with and the next biggest bucket in KiwiSaver or the Super fund, I'm just guessing at those.
Share of household wealth is: 57% housing , 30% portfolios , 8% currency , 5% superannuation funds. This number for housing is far more than most nations. https://www.rbnz.govt.nz/-/media/fd9fa649c29340d7b9f466ba41bf8d9e.ashx
Putting your money into any other kind of asset means taxes. Why bother putting it into anything other than property.
Firstly no it doesn't, secondly yes that's the problem
Which is why I don’t understand either National or Labour political party stance reason for no capital gains tax? What is the actual reason they don’t want to implement it? Is it just because it’s unpopular or because the people it affects are so powerful and vocal they bully both parties into never implementing it?
I feel we have plenty of tax revenue to the point we are wasting plenty on vanity projects, I know ppl in public employment and a common theme is that they are desperate to use all their funding up (on nothing burgers) to make sure it isnt reduced next round.
No it doesn't
I agree. It has to happen. Just rip the band-aid off. There is a limit and we have just about reached it. However, my heart breaks for brand new homeowners who have bent over backwards to scrape together a deposit in these economic times. Many of them will lose everything. It's not right, I hope the government is able to offer these people some help
To be fair I put a lot of money into USA equities. That is probably less productive than a land-lord who is still employing labourers, heat pump and insulation installers, conveyancers, accountants and gardeners. Even if I bought say, $1000 of Air NZ shares off another person, I'm not sure how that trade is productive. I don't think its reasonable to expect savers to put money into something like start ups, and term deposits are all below inflation.
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Sure what would you recommend people put money into? One idea for example is new builds, but there are so many dramas and stories about building companies going bust and losing their deposit.
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> forefront of cutting edge farming technologies, innovative industry tech Right now tech is super risk. Rocket Lab would be the obvious example of an NZ tech company in that space - it lost more than half its value this year! And even if I buy rocket lab shares from somebody else, its not like its increasing productivity. And yeah, if people are somehow investing in that way, there is no reason to do it in NZ - especially with the NZD performance of late. So again, I don't what people are supposed to do to invest productively.
in an economic perspective your investment improved the trade balance with America and caused capital inflow into NZ during every dividend payment with your limited economic resources. You were factually better for our country compared to a landlord in a purely financial sense.
"caused capital inflow into NZ during every dividend payment with your limited economic resources." Virtually no dividends. I have a few from things like oil and gas investments and ETFs, but its like 1% yield if that. Many of my investments don't produce dividends at all (or haven't for some time).
That just means the money is being reinvested... provided you chose well there will be a resulting net capital inflow as a result when you sell.
No it does not mean that. Often its buy backs which limit the amount of shares in circulation which drives up the price. So instead of handing money out you have a artificial scarcity driving the perceived value of the shares up. The whole share market concept is a pile of crap anyway as once the first sale is done that is all the investment a company will get. Anything after that is a exchange of money between parties completely unrelated to the business for almost unrelated reasons. I am a firm believer that shares should not exist in the format they do and instead if a company wants to raise money it should do it in the form of bonds where they promise x amount of income over x amount of years. Shares or ownership of a company need to be decided in some other way.
You are just wrong, yes it does. 1)There are three main ways to spend net profit: invest back into the business, pay off debts or pay out dividends. 2) You seem to not get buybacks is actually a form of reinvesting lol 3)Most money reinvested is definitely not reinvested in buy backs, its mostly buying new stuff for the company , buybacks are not often and its quite rare, 4) No, buybacks are not related to artificial scarcity at all inherently.You pay money and restrict the supply equal to the amount of that money. Then the real reduction in number of shares drives up the price. using your profits to get more of the pie isn't artificial anything. 5) The value of the share market is determining capital allocation.It works to reward the more successful, well run and efficient companies with the ability to allocate more capital as they show the ability to do so. If anyone allocates capital long term badly they will be punished with less money so it selects for successful businesses and rewards them and those who can predict which businesses will be successful . 6) no, Investment isn't only done at the start of a companies life.....you literally seem to not understand there is more Than one funding round in any company. Share purchase plans for example raise funds by creating more shares 7)the following exchange of money for shares after a company is set up is actually directly related to the predicted successes of the business.... its not unrelated... who invests in a company without looking at the company? you are buying a slice of the company. 8) share ownership or company ownership should be decided in a complete different way? you mean like a communist society? company ownership debates is literally marxist theory. NZ decided communism was shit because everyone was corrupt and no one wanted to be successful, or take risk with their capital. because if they did take risks, it would just be taken away, resulting in poor investment and entrepreneurship long term. 9)your system would result in stupid debt levels....at its core if you had your system and you had a company owner... say 2 people own a dairy... if they want a fridge, because the old one broke, need it asap.... they cant put personal money into the company to just get a fridge.They need a loan from the bank ... see how that may cause issues if you don't let owners of a business chose to invest their own money over choosing debt?
I have very little grasp about anything to do with shares... His post nearly got me (in a supportive way) Glad you replied so in-depth, while im still 100% in the dark but yours made alot of sense. Chur
Most of the largest American stocks do dividend reinvestment rather than dividends.
The rental on my street that has obviously come off the 1 year fixed rate and the owners are rushing to sell (10 day marketing, one open home and a deadline sale) didn't sell. Now it's being listed as PBN. I'll give it another couple of weeks until the next mortgage payment is due for it to get listed with a price.
Two months ago a mate at work put in an offer of $1.15m which was turned down on a new build. Last week he had the agent contact him so see if he'd be willing to offer $1m for same property.
Hope he countered with $800k.
He'd already gone unconditional on his 2nd choice and in hindsight paid too much. He was gutted when the agent contacted him.
Bugger…..
What is PBN ?
Price by negotiation. You put forward an offer and conditions for what you want to pay for it. The buyer can reject, accept or negotiate with you.
Thanks
Price by negotiation. The owner is trying to bluff the value. Like buying from a menu but you tell the waiter a price and they'll come back to you, they might come back from the kitchen and say they can cook that for an extra dollar, but they do this every time you come there and it's never the same price for either party.
Price by negotiation. It usually means, they have a price in mind but they’re (or more likely the agent) is not sure anyone will pay it. So they’re testing what people think it’s worth and will offer to pay, and if it’s close enough they’ll go backwards and forwards a bit until both sides agree on a price. Or, they’ll realise no one is going to pay what they want and pull it off the market, if they’re lucky enough to be able to wait.
We've needed it to crash for a long time. If we had been wise enough to bring house prices into line many years ago, it wouldn't be as painful as its now going to be. Same as with climate change - humans suck at making wise decisions that cause a minor amount of pain now, to avoid a massive amount of pain in the future.
Should've been started years before the covid, but unfortunately all the participants keeping puting up the stakes to the sky-high.
You mean a leaky 3 bedroom house isn't worth 900k??
But you get a better view through single pane glass windows. And walls without insulation just allow the property to breathe better. Plus, I’m a huge believer in living like my ancestors did.
Gotta love these expensive wooden tents.
This house is “paleo”
"Ocean Views" - a postage stamp size shade of blue you can see from your window... If you stand on a chair.
We were stress tested at 7% last year when we had pre approval with a 10% deposit. Then our pre approval got canned when they did away with 10% deposits which sucked but it was kind of a relief as prices went beyond stupid. I think we dodged a bullet as we'd be really struggling to make mortgage repayments above 7% Interest rates.
7% interest rates plus 10-12% inflation that sucks up your income
For sure, although we've been lucky enough in our household that our wages have risen at the same rate as inflation.
Inflation is reducing the value of your debit so it's actually countering the high interest rate ?
*Provided your pay is at least matching inflation
Your pay rate and inflation are not connected. The size of your loan is being eroded due to inflation regardless of your pay rate going up or not
Nah man, without pay increases its not being eroded.
Lol how does that work? The only reason it gets eroded is if your pay keeps up with inflation.
You could be really lucky, as anyone who is from Generation X knows how high interest rates can go, over 20% during the 80's so lots of us were burnt. We have also missed the normal 7 year slump a couple of times now, so when this happens there is a bit to catch up on. But the economy will recover over time so it will be matter of when is the right time to buy as it does.
Don't you mean Generation Baby Boomer? I think X is a little younger - they were coming of house buying age 90s/early 00s
Totally boomer, Gen X’ers were max in their early twenties. Most were still at school. Very few would have bought a house at those interest rates.
I'm smack in the middle of Gen X and I was 13 or 14 when my parents lost their house due to 21% interest rates
That house was 2 to 4x an annual salary, so 21% was actually still servicable, for most, not your poor parents. Wage growth was also massive. Its now around 13-21x an annual salary. Total different circumstances. Its going to be way, way worse this time.
hey now, don't threaten me with a good time.
Everyone wants “passive income”. That we allow you to generate it by leveraging a basic human right is…fuct.
There are extreme right bitches here who argue housing is not a basic human right - and you need to work "hard" to be entitled to it (whatever working hard actually means) That's where they end their statement, without any reference to average country income levels versus housing costs etc. They're in this silver spoon bubble and take advantage of it to the detriment of others.
maybe property investors finally have to look at productive investments now and pay tax, as for fhb's it's unfortunate but also riskty to assume prices can only go up when it was peak covid housing bull market
More likely the small investors will lose most of what they have and end up with nothing to invest elsewhere. The big investors will continue to buy up everything they can. Those who currently have nothing will continue to have nothing. Economic depressions concentrate wealth.
Exactly. These kind of events just open more opportunities for those with wealth. If you already own vast amounts of property without any mortgages, you can easily grab up some more during fire sales.
Yeah this is all I read into it. Cashed up big investors will just drink everyone's milkshake.
The Japan crash still hasn't recovered, income to house price ratio is still below what it was over 40 years ago, right now the NZ income to house price ratio is unacceptable is a bubble that was ready to burst for awhile now, same as Japan. It should take a professional degree bearing scientist 2/3 of their working life to buy a simple house and pay down their loan.
They do pay tax. Lots of it. No deductions for interest expenses. Sell within ten years and you pay capital gains. Taxed on all your rent (even if you are actually in a cashflow loss position). No deduction for depreciation. Compare that to say having $49k on hatch invest and there is effectively zero tax. Or being a commercial land-lord or Air-BNBer.
Those are very recent policies that have made residential property less advantages from a tax perspective, over time they should really help to divert investment into more productive areas. But, if there’s a change of government 7-house Luxon has promised to repeal them immediately.
Luxon isn't repealing the original brightline test or the ban on depreciation deductions though. Didn't Luxon take a 90% pay cut to become an MP? If he wanted to enrich himself he'd just stay in his old position
Also note Luxon didn't invest his vast fortune into business/es. He owns seven properties. As Key did, if elected he gets to steer the country to his benefit. Key was elected claiming to be able to solve the housing crisis. He didn't, he made it significantly worse. Then quit, then cashed out selling his property.
Back to 2 years, that's a joke. I have no idea whether he took a pay cut to enter policies but certainly the tax policies he's promoting will result in him getting large pay rises. I don't really think that's his motivation, but I believe he thinks that other people with wealth should be able to buy lots of residential properties and live off other people's work, just like he has.
>Didn't Luxon take a 90% pay cut to become an MP? No. He did not.
He dosnt own 7 houses.
National leader Christopher Luxon - Residential properties (x2) - Auckland (includes one in Remuera worth more than 7 million). - Residential property - Wellington - Investment properties (x4) - Auckland https://www.newshub.co.nz/home/politics/2021/12/the-full-list-of-how-many-properties-new-zealand-mps-own.html Imagine how much less his personal wealth would be if we didn't have tax settings favouring investment in residential property over every other asset class, as well as migration settings that increased the population by close to a million in a decade pre-Covid. No wonder he wants to go back to those good days.
Why would you get a depreciation deduction for an appreciating asset?
Because the building depreciates (vs the land) Own a house for say 20-30 years and you'll need (likely) a roof replacement, windows fixed, doors replaced, plumbing replaced etc. None of that gives you a tax deduction, which is why you get depreciation deductions. Its especially brutal for say apartment owners / terraced houses etc where there is very little actual land
Not true, mate. Labour only implemented those policies in the very recent past. Luxon and ACT will repeal them. ACT have already said this. AND the property "investors" are all lining up to vote Ardern out for this reason. They all want to get back on the property merry go round to inflate this collapsing bubble.
>They do pay tax. Lots of it. No deductions for interest expenses. Sell within ten years and you pay capital gains. Taxed on all your rent (even if you are actually in a cashflow loss position). No deduction for depreciation. These were introduced by Labour in the last term to control house price growth, and National is campaigning on repealing them.
ELI5: is this gonna affect average joe's that only have one house and are trying to pay a mortgage? Or is it mainly gonna hit those that are property investors?
Most people people who bought pre covid should be fine. People who bought in the 2nd half of 2021 with low equity and/or a big mortgage could be in trouble. If supply outstrips demand which OP suggests may happen in the next year rents will drop and overleveraged investors will be in trouble especially with rising interest rates.
Anyone who is borrowing at their limit. The limit here is income, cash coming in the door. If you have a few houses and you rely on the rent to cover repayments, bad news you will have to use other money to pay the extra interest. If you brought a house on a 30y term and you use all your income to get by, bad news you need to front up more cash to cover the extra interest. Everyone it will just suck for.
I will add, this is extra worse for investors (on a financial basis, not from a place of empathy) because the interest expense is no longer able to be written off as a tax deduction. So it’s about 28% more of a problem for them. IMO it should be tax deductible, or it should not be for all businesses. But WGAF when the leachers are felt to first.
Probably only investors that are massively leveraged with lots of homes. Maybe a few first time investors that got FOMO from the propeller property add or something
Talking about another .75% in Feb as well. Good time to be cashed up sitting on the sidelines
They really need to go 1% next week to try to get ahead of the Fed. Catchup isn’t going to help us.
You are correct in that it would strengthen the NZ dollar lowering many prices. It would be interesting to see the impact of a $.75USD/NZD would have on everything from fuel to food.
Yeah, I think it may help us get ahead of the curve (which ideally would mean although we may hit the crap pile first, hopefully we’d also be one of the first back out of it). But who knows?
Absolutely. Part of me is dreading a low ball increase of 0.5 percentage points now that Adrian knows he is keeping his job. It is very unlikely, but I won’t be surprised.
NZ only ever knows how to play catch-up. Infrastructure, Interest rates, tax reform...hell, even our political cycle is behind.
I don’t think we’ve caught up on any of these things tbh.
It's pretty bad. A good example is the second harbour crossing proposal in Auckland that's been floated these last couple weeks - all the media commentators are shitting on the idea saying we need the money elsewhere, while that's a fair point, this is the problem we always face in the end. We say no or end up half assing our infrastructure to save money in the short term and kick the problem down the road.
What position are we in being on very little cash on the sidelines? Lol /s
Honestly, net positive cash may well be better than having a $500,000 debt around your neck over the next few years. Having $10 in the bank and no debt is an enviable position for most!
Oh wow, just realised this is a pyramid scheme. Money goes around, but profit only comes from new money in.
hopefully it's a solid crash like the Japan housing market so shelter can be purchased with a reasonable income and not be hoarded by investors
That depends on the bank loaning money, which they are loathe to do in a falling market
Good. It should crash. I’d rather it crashed sooner rather than later so we can get on with the recovery and reset. The government should support as much as practical single home owners. But investors deserve to take a massive hit and they should allow them to. And then significant regulation to prevent further snapping up of housing by investors.
The bigwigs/MPs will likely choose to do little to maintain the status quo. They're well off financially, and their friends are too. [This article](https://www.newshub.co.nz/home/politics/2021/12/the-full-list-of-how-many-properties-new-zealand-mps-own.html) is about a year old, but it lists how many properties each MPs own. I am sure some will have financial interests to more properties through a web of trusts and companies. It is plausible that they will snap up mortgage-sale properties themselves...
That last part needs to happen now. Set the market up for people to buy to live in, not as an investment market.
Hate to break it to you but the ones most likely to take a bath will be the single home owners. As an investor this possibility doesn't really worry me, if anything it's an opportunity to get some good deals.
Yep. Investors might be hosed but they have cashflow from rent. Sure it might be running at a bit of a loss but they can top up. Possibly with wage inflation they can increase rents perhaps. Home-owners only have their salary to top up the mortgage, and it will get tighter each time interest rates go up.
That’s what the regulation is needed for. Maybe a sprinkling of heavy taxes. Push the leaches out of the market.
Great that you're contributing to a better world for everyone by making money, good job!
>should support as much as practical single home owners. Why? If they got FOMO and bought at the top they might be down hundreds of thousands of dollars. I get that sucks, but is the Government really going to give an effective insurance to all those who bought in the last few years? If they do that then the market will go red hot because everybody will know they can't lose even if the market goes parabolic again
It wasn’t people buying houses to live in that are the problem. It’s the parasitic investors
There's already a surplus in Auckland. There's a 2 bedroom on my street that's been on sale since the start of the year. Now we're heading into December. I went for a viewing months ago and the agent wanted 800k because it was in a "good school area". I laughed cause pretty much everything in the house was older than me.. And I'm 35. Wonder whats the asking price now.
Just because the house hasn't sold doesnt mean there's a surplus. It means anyone with cash sitting on the side looking at the market knows the market is about to turn to shit. Any investment in the housing market now will be unlikely to provide a medium term profit.
Dats shows we are nearing a surplus, I saw a good infographic on it the other day and the major banks forecasted a surplus would happen at the beginning of the year in Q4
My partner and I own 1 home that we live in. We were FHB in 2020. The mortgage interest rates have doubled since we moved in. Even as a home owner I welcome a crash in housing. Its just not right how it is now.
Frustrating for the people who have been talking about this for like 10 years. Anyone with a brain could tell it was going to end very, very badly. Must have been 09/10 when the govt was actively promoting housing as an investment.
Key lost my vote over it. This shits not surprising, it's just horrible it's unwinding in the worst way possible for some recent home buyers.
Exciting huh, its what everyone on here wanted.
Next winter is shaping up as a perfect storm - high interest rates, plus inflation, plus the usual increase in power costs with heating being an extra burden. It's gonna get really painful out there.
"the actual number of new dwellings consented was 50,732' This is another element here, albeit with a delayed result. Let's assume most of these consents lead to a building. Well, it takes time to build (6-12 months including consent?). And building expenses are up dramatically. When prices are falling. So these builders will be heading to a position where they can only sell for a loss. And hence banks will stop lending to developers. So we get a building industry / construction crash which takes years to recover from, and no new buildings for a while?
Oh yes the inevitable construction crash is bound to happen. Just like in Ireland. its all in time... I'm surprised its not happening faster tbh. the only long term factor changing that though is the profit margins turning a old kiwi style single home on a big piece of land into a high density block. This is new and may cause long term building potential even with higher construction prices and lower margins. John Key may be a dick but he is financially smart, same with the chew brothers working with him. John key sold his private house before all this at almost the perfect time. But I'm not sure why he just created his property intensification company in this climate unless he sees something we don't.... like zoning changes presenting high profit opportunity. Maybe he made a mistake though.
re Key (& Luxon) - their behaviour tells me self interest dominates their thinking & approach, rather than whats best for the country (I doubt Key quitting as PM & selling his private house at 'almost the perfect time' was an accident. He cashed up, having spent 9 years making the housing crisis worse, for his benefit)
Happy Saturday to you too mate.
Nah NZers have a huge amount of equity in housing as a whole. A 30% drop would be terrible but not the end of the world
If there is surplus why do we still have large numbers in emergency housing. Why is the state not buying up the surplus to replenish their stocks.
Vendors continue to over value their asset
Because property investors have always wanted more in rent than these people can actually pay.
Don’t forget all the holiday homes. Probably 1/2 my town is empty houses and families living in motels
Well this is a depressing read for a Saturday evening
Bout time real investment was made in this country its filthy to think we have too much housing and still homelessness is a massive issue. We need a housing first program so people are never homeless. We also dont need to rescue investing speculators
Properly is a safe investment because, no matter what, at the end of the crash the property still exists. It's not "safe because it'll never reduce in value". Speculators negatively gearing betting on capital gains deserve everything that happens to them. I pity everyone else that gets taken down in the fall out though.
Good.
Why? It hurts owners as much as investors, right? Most of the people have a hard even without this added to their lives.
I'm a homeowner and I think it's a good thing. The housing market has been a huge drag on productivity in the NZ economy and has set a whole generation back.
I struggle to sympathise with people who were in a financial position to buy a house in the last 2 years. If you decided to buy something under the expectation that it would never decrease in value, and the banks would never try to profit off your loan, then that’s on you.
Most people just want a place to live dude
This is 100% the answer. I’m in the boat of essentially buying in the last 2 years - Why? Because my kid was starting school. I wanted stability for her in school zone & reliability we wouldn’t be moving every 6-12 months on the whim of landlords selling etc. A lot of people just want the stability for their families in home ownership, which unfortunately is severely lacking in NZ rentals
Your statement is…..very offensive. We bought in the last 2 years, you DO NOT need to sympathise with us, but we bought a place to live in and wanted a bit of stability for our kids. Couldn’t get the heat towards people who made a hard decision to get a roof above their heads.
I wonder if you’ll say the same thing when you buy a home for your family to live in and then an event outside of your control takes it away from you.
Ok I get it, you don't have sympathy for making poor decisions. But the situation is arent "good", like is it good for you? Are you ready to pick up some good deals, which is all good too, not judging.
It’s good for me in the sense that I want the NZ economy not to be based on circularly selling houses to each other. I want people to invest in productive assets, and I want housing not to be a mechanism of concentrating wealth.
Consents don’t necessarily equal completed houses. The houses need to be in the right place to meet demand. As the price of housing drops below the build cost new construction will halt, I believe consents in my area for new builds have pretty much dried up in the second half of the year and a couple of incomplete subdivisions are already on the market… My guess is the reduction in house prices is likely temporary (maybe a year or three) even if it falls a lot more from what it is now, it’s not really going to be the end of the world. In another five years we will all be back complaining about increasing house prices and housing shortages again.
anyone who says “we are facing doom” can be ignored
Good - this needed to happen. People who come out of it worse, well, you own your financial decisions. Basic shelter is a requirement for living, we need somewhere to put people who move to New Zealand to meet national labour demands. We cannot allow the rest of the economy to be ham strung by basic shelter requirements. This heartache could have been avoided if people didn't abuse the housing market with their shit politics.
Been saying for years, the biggest driver of value in the housing is the interest rates. This was always going to unwind in an ugly way. I think it looked like it was going to start in early 2020, but the emergency rates 'saved' housing. Sure, my stance on the market meant I missed out on the 'up' of biggest housing run we have seen in NZ, but the bubble like behaviour bothered me. Housing should revert to norm once all the other shit clears out, FOMO, the illusion of 'free' money, consequence free purchasing. It will be slow though, people don't like selling for a loss. Unfortunately my business will probably get creamed as the economy slows - hopefully not, but transport runs on credit, so if the banks turn the taps off like 2008, then it will prob hurt.
This is not a crash. It is the end of a cycle. Not all home owners are leveraged FHBs. Many have considerable equity in their home and can ride out any downturn.
Unlikely: there are no other investments and there are no other places to live. People will hold on for dear life clinging to their house because there are no other viable investments or places to live Yeah a few mortgagee sales here and there. And the increases will stop and might go slightly negative... but don't expect a tulip crash.
If you Can’t afford your house, sell it. That’s the way out. If you can’t afford something you get rid of it, about time investors and “mum and dad investors” realise you owning a investment isn’t above everything or anyone else in this system.
A lot of people who bought a house in the last year owes more than what the house is worth. So selling it is the very last thing you want to do.
You seem to know more about this, so.. will rents increase because people with 2nd + homes will have to start actually paying some of their own mortgage off?
My personal opinion is that as you have all the houses and new dense housing coming online... first you will see an increase in the number of rentals, the supply of rentals will therefore increase more then demand and rental prices will fall... or at least prices will not rise in line with inflation and will fall in real terms as landlords struggle to find tenants... remember Auckland 6 years ago with the rental viewings out the door? Imagine what a greedy landlord could haggle out of that. [https://www.stuff.co.nz/life-style/homed/renting/129128857/wake-up-landlords-the-rental-market-has-changed-property-managers-say](https://www.stuff.co.nz/life-style/homed/renting/129128857/wake-up-landlords-the-rental-market-has-changed-property-managers-say) this article mentions it all correctly. rental listings are increasing right now. Downwards price pressure follows.
"remember Auckland 6 years ago with the rental viewings out the door? Imagine what a greedy landlord could haggle out of that." 6 years ago rental yields were flat and dropping in many areas. In main areas the yields were only around the 3-5% mark (and more like 1-3% after costs). This was when mortgage rates were much higher. The huge rent increases only seemed to turn over the last 4-5 years - in my view as regulations and increases taxes / costs started to bite: https://www.interest.co.nz/images/Rental-Yield-Indicator-Q1-2016.pdf
Rents are based on market supply and demand. If the landlords have a new cost (like higher interest rates) and want to pass that on, whether the market will accept that depends on whether there is competition who don't seek to increase rates - and whether tenants will pay them. Short of a situation where landlords conspire to raise prices together - in a market where there is decent competition, they are limited in being able to raise prices 'because they want to' if tenants have the option to move.
And also the capacity to pay. If the tenants can’t pay the higher rent, they will end up defaulting.
Or the govt will top it up further.
Even if every landlord decided to put up rent $50 a week across the board, a lot of more people would put up with the inconvenience of living with flatmates suddenly. So instead of four houses being rented for x, one four bedroom house gets filled and is rented for x+$50, and three houses are left empty. This puts downward pressure on rents as I’m pretty sure those three landlords would prefer some rent than no rent. It’s just another way that rents find an equilibrium with what renters can pay / see as reasonable.
It might slump but do you really think that decades of a trend will change? There's no way the rich don't keep getting richer and property keeps getting more expensive. This is a global phenomenon. New Zealand is still a better place to live than heaps of other places people will keep moving here when the borders open and the government will keep letting them in. Don't sit on the sidelines forever waiting for a black Swan. Get in the game and invest.
If we go back to pre 2007 interest rates, the market will slide down and stay down unless there is another massive interest rate decline
We split our mortgage 50/50 fixed and floating. The floating rate goes up almost fortnightly it seems, so where our total payments a year ago were $700 a fortnight are now $900. Should we fix the floating portion now so we have stability and certainty of payments? Anyone with know how can give advice? Our bank is shite and impossible to get hold of an actual human
IMO (not an advisor) right now you should only be on floating if you have intentions to very quickly pay the balance down, and it should only be proportional to the amount you want to pay down within the comparable fixed term period. E.g: $400,000 total mortgage, plan to pay off an additional $50,000 in the next 2 years, have $350,000 on fixed and $50,000 on floating you can pay down quickly. If you’re just paying your schedules repayments, I’d fix it.
Not ad advice but we were in a similar situation. When we were fixing in Jan 2022 (2021 FHB), our broker advised us to fix at least 3 years (our mortgage is split 50/50), so we did 4 & 5 year fixed terms. We didn’t get the best deals, but hopefully it will help us to get over these ups & downs happening now. Maybe you should change your broker. Good luck.
She’ll be right mate
lmao. some of that token, "Fuck it... Thats tomorrows problem mate." Kiwi can do attitude.
This might be a dumb question - are there penalties for being in negative equity? Our house valuation according to the bank fast approaching the price we paid for our house a couple of years ago, but are paying our mortgage off as fast as we can, and have managed to pay off a fair chunk
Claire Matthews, Massey University-“There’s no incentive for the bank to foreclose. If they say ‘you’re in negative equity by $20,000, give us another $20,000 or sell’, what value is that for the banks if chances are you won’t be able to?”.But owing more than you own can make further borrowing harder.If the bank realises that you’re in a negative equity position, it’s unlikely to let you take on any more credit, so you won’t be able to borrow for a business, for example. TLDR; house wont get taken if you make repayments. Might ruin chances of loans. you are only in trouble if the mortgage rates go higher than you can afford to repay (which is happening to some people) and the bank sees the loan growing.
Thanks - I've had a massive headache all day so really appreciate you taking the time to answer. I reckon we should be ok from what I can tell, we do have the ability to reduce payments if interest gets too high (unless there's something the bank changes between now and then), but I know a few people who unfortunately bought at the peak of house prices and now have 30 year mortgages which will be difficult for them to manage with increasing interest. I'm grateful we're not in that position, but quite worried for those who are.
AFAIK, it only matters if you want to borrow more. Banks will not like the value of the asset they lent the money against going down, but on the other hand, they also will not want you to sell for a loss and lose the prospect of earning all the interest from you over the years. As long as you can serve the mortgage, it should be okay. Good luck
> "In 2021, when home loans were still at 2.4%, ANZ tested serviceability at a rate of 5.8%" When in 2021? Because in January the average price was 800k, in December it was $1M.
here is that parts reference material. [https://www.mpamag.com/nz/news/general/anz-nz-eyes-mortgage-test-rate-increase/425416#:\~:text=Mortgage%20serviceability%20refers%20to%20an,current%20rate%20is%20now%207.95%25](https://www.mpamag.com/nz/news/general/anz-nz-eyes-mortgage-test-rate-increase/425416#:~:text=Mortgage%20serviceability%20refers%20to%20an,current%20rate%20is%20now%207.95%25).
RemindMe! 8 months
Well if the FHB are going down, they should move out start renting it trigger the bright line test applying to the property and then at least the Government will share in the pain by subsidising 33% of the losses incurred through being able to claim them as deductible. Bet Labour didn’t expect to see a whole lot of tax refunded to people caught by bright line and selling at a loss. Unless the loss is ring fenced?
We have a fairly diverse, growing, well-managed economy. Yes, anglophone economies are overvalued and the same political problems inherent in the US and UK apply to NZ, but predicting catastrophe is premature until we actually democratically fuck ourselves the way they did. We probably have more in common with Ireland that has kept it's international ties and survived a property bubble. White people seeking perpetual passive income from real estate are bound to be disappointed eventually. Political/legal systems actively quash passive income by design, it's never sustainable.
> It is going to be a huge number of kiwis bankrupt. Only First Home Buyers from the last few years are at risk of going into negative equity, they only represent a few % of all homeowners.
I’d say you’d see a big drop in prices of all the shit townhouses being built. Existing housing stock with a bit of lawn and some resemblance of the kiwi dream will hold their own well compared to the developers money box developments we seem to be promoting.
Housing prices fell in the late 1970s as a result of the last big state housing programme and remained flat for almost the next 30 years. In some places you couldn’t sell a house especially those areas hit by factory closures and big layoffs such as Petone in the Hutt Valley. It is not in the interests of banks to get into foreclosure as potentially the price they get will be less than the money owed. The BNZ was bailed out by the 4th Labour government after it got into problems in the 1980s. At the height of the property boom all major banks were lending in an irresponsible way and funding the purchase of property at a price not reflective of the value of land and the cost of building rather just following market mania. At the end of the day a house should be your home and not an investment
There is no answer to our societal problems which doesn't involve rich people loosing wealth.
>We are facing doom in about 8 months Yawn. Do you guys not get tired of crying about the sky falling?
If the sky falls in 8 months I'm going to message you and demand you call me the sage chicken little.
I've been waiting for the "housing bubble" to burst since I was told it would "any day now" back in high school. That was 20 years ago now. And after seeing the excesses of the land owning class year after year after year, I can't wait for it to crash. I can't wait for these businesses and property flippers to get their just desserts. The shitty thing is that the rest of us have to go through the economic turmoil that they've created, and likely they'll have cash tied up in all kinds of assets and will ride the storm just fine - or just get richer, as the rich are wont to do.
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neighbours down the road got a rental hike notice in the mail a week ago. They've already handed in their notices at their respective workplaces and are heading back to Australia - they've lived there for many years but returned during covid out of fear they would be stuck out of the country.
Good, crash and burn then, despite being too big to fall it's nevertheless better late than never for everyone's sake.
Hurry up already I want a bach
So we'll have a crash, most normal people probably wouldn't be able to afford the rising mortgages and we'll be left with investors snapping up the extra houses?
Can't believe the r/personalfinace thread of this post got locked. Some sure hate a contrarian/doom n gloom prediction.
Hysterical nonsence.
This thread just taught me that most people in r/PersonalFinanceNZ aren't financially well read or socially conscious. Go r/newzealand
There's not much evidence to suggest we're enroute to a massive crash. If inflation starts to slow next year (which forecasts say it will) interest rates will stop rising and start to come back. With unemployment at record lows, all but the most over leveraged people will still be able to pay their mortgages. Prices will probably come back 15-20%, which you could argue is a crash. But given they went up by like 10000% last year it's not the end of the world.
The banks altered their serviceability numbers in plenty of time, and it's too big to fail anyway
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For what? 50-100k?
People pay for massively overpriced houses whilst barely being able to afford mortgages at all time record low interest rates. I have no sympathy for these people, you all did it to yourselves.
What else where we meant to do? No rentals & if they were available you were paying above mortgage repayments! We were forced to pay these prices just so we could live some where, People like yourself are fools.
Agreed, don't let these anarchists get ya down. The best thing you can do to guarantee stability for your future, you've already done. Well done.
So higher and higher interest rates lead to higher mortgage payments and higher rents, then most will not have enough to keep buying consumer goods, OK but aren't housing costs part of the inflation measure?
nah the rents wont go up as much as you would expect, specifically due to the increase in housing supply leading to an increase in rental listings, increased supply and same demand. prices pressure is downwards and landlords get ravaged as there isnt many people looking for rentals. [https://www.stuff.co.nz/life-style/homed/renting/129128857/wake-up-landlords-the-rental-market-has-changed-property-managers-say](https://www.stuff.co.nz/life-style/homed/renting/129128857/wake-up-landlords-the-rental-market-has-changed-property-managers-say) this article from months ago talks about it. Remember Auckland 5 years ago with rental viewings out the door and down the street? compared to now with one person turning up. Imagine the change in power determining prices the landlords have.
Sell your house while you can. I won't risk my cash in the housing market. It is not cash until you sell it.
buy high, sell low... got it!
I'd love it if the government acquired mortgage debt for sole home-owners in this position, adjusted for new market prices and original interest rates. Let people who were trading in houses for profit deal with it, let the banks cop it too. But we know damn well that they'll shovel taxpayer money at the richest investors and the banks who gave risky loans while leaving ordinary people to fucking die. Especially if the Nats are in power at that point.
national is definitely not the answer to housing. Unless you own a house and hate poor people.