House Prices in NZ - hot or not

[kiwidream]

Although way cheaper in terms of affordability than housing in South East UK, housing still seems to be quite expensive in NZ relative to wages. In SE UK (outside London) in a good area, it is something like £350k for a small yet reasonably nice terraced house. With average wages in the area being around £30k thats a 12x multiplier. In Auckland, it seems like the average wage is $40k with average houses being $400-500k? Is that about right? Ok admittedly, an average house in NZ is considerably larger in terms of size and plot than the equivalent in the UK but that still seems like a hefty multiplier.

Any soothsayers on here have any feelings on where the house price is going in the short-mid term? Is it considered to be a bubble and if so, is the bubble likely to burst or adjust over the coming few years?

[KatieBen]

Interest rates are going up and house prices are still believed to be overinflated at the moment. General feeling here is that they are going to continue falling over the next 6 months or so. Section prices seem to be less resistant to change and on the whole are staying fairly stable.

Should point out that my crystal ball for house prices isn't tried and tested, having bought at the peak of the market and then had to sell at a crashing low twice now.

[April]

My feeling is that the prices will come down. I've been watching the progress of many properties over the last two years and have discovered that many trying to sell in the 7 or 800's eventually sell in the 5 or 600s.

Having said that, there are many people out there who are just happy to sit and wait for a sale, even if it takes several years.

[M-Squared]

I follow BNZ's chief economist's newsletters (http://www.bnz.co.nz/About_Us/1,1184...PTonyAlexander), worth a read!

[gonzo]

Hi there,

Looking at the figures you are using the multiplier is virtually identical. The main difference is that mortgage rates in NZ are higher. For what its worth my guess is that property prices in both the UK and NZ will fall as falling real incomes ( i.e after inflation) limit peoples ability to service mortgages. Again in my opinion net migration into NZ also impacts on property prices and as it is virtually nil at the moment then this will also exert downward pressure on the NZ market. Given that the UK is one of the major providors of immigrants into NZ and that other than in the affluent S.E of the UK there is currently very little "pick up" in the cost of living, or more particularly establishing yourself in NZ from a UK perspective I would expect this to continue. Obviously this is not the case for immigrants into NZ from asia particularly China. The slump in the value of sterling against both the NZ and Australian dollar (carry trade?) means that relative to the position some 5 years ago they both look like expensive options. By the way the figures you are using for Auckland ,would again in my opinion, put you very much at the bottom of the market.

[ourquest]

Although way cheaper in terms of affordability than housing in South East UK, housing still seems to be quite expensive in NZ relative to wages. In SE UK (outside London) in a good area, it is something like £350k for a small yet reasonably nice terraced house. With average wages in the area being around £30k thats a 12x multiplier. In Auckland, it seems like the average wage is $40k with average houses being $400-500k? Is that about right? Ok admittedly, an average house in NZ is considerably larger in terms of size and plot than the equivalent in the UK but that still seems like a hefty multiplier.

Any soothsayers on here have any feelings on where the house price is going in the short-mid term? Is it considered to be a bubble and if so, is the bubble likely to burst or adjust over the coming few years?

I'm confused because the figures you suggest actually mean that houses in Auckland are cheaper with respect to wages than South East UK and I'm not sure from your wording whether you meant that or not? If they are cheaper, then, well, they're cheaper. That's gotta be good.

Most folk on this forum appear to think that housing here is terrible though, as it just isn't about the seaview or the big section. It's all about insulation! So make absolutely sure that you buy a house one day with insulation, as we all know that you can always buy a painting of the sea if you don't have a view. Naughty me, I'm being sarcastic again. Must be the cold dampness getting under my skin.

If you are going to live in the house you buy, then it doesn't ultimately matter what the market is doing as you buy and sell in the same market. If you are buying an investment rental then just make sure that it makes significantly more money than it costs you and you could then have pretty much have as many as your bank allows you to (and don't ever sell them!).

[ourquest]

Should point out that my crystal ball for house prices isn't tried and tested, having bought at the peak of the market and then had to sell at a crashing low twice now.

I'm afraid that this rather proves that your crystal ball is in fact tried and tested. Unfortunately though your ball hasn't been calibrated correctly.

[M-Squared]

Should point out that my crystal ball for house prices isn't tried and tested, having bought at the peak of the market and then had to sell at a crashing low twice now.

Actually we're doing the same. We bought here in Nov 2007 and are on the market now. However we bought veeeery low as we were cash buyers so we're thankfully still in good stead now.

Most folk on this forum appear to think that housing here is terrible though, as it just isn't about the seaview or the big section. It's all about insulation! So make absolutely sure that you buy a house one day with insulation, as we all know that you can always buy a painting of the sea if you don't have a view. Naughty me, I'm being sarcastic again. Must be the cold dampness getting under my skin.

Sea views = worse than insulation. If you have a sea view, you're far more likely to have the wind come whistling in from the sea from that very view! Of course it all depends, too, on the way the house faces. Personally I can't believe we're considering a house that gets very little sun, just because of location...

If you are going to live in the house you buy, then it doesn't ultimately matter what the market is doing as you buy and sell in the same market.

Exactly what we're doing It's a buyer's market, so hopefully someone will come along and make an offer, even if it's subject to sale (ugh!). If we sell, and it's via a chain and we don't find anything we don't want rightaway, then we'll rent until we find the house we want and will then pounce as the beloved cash buyers!

[ykkee]

you can try to compare with NZ townhouse (terraced house), some of them is around 300-400k range.

[kiwidream]

I'm confused because the figures you suggest actually mean that houses in Auckland are cheaper with respect to wages than South East UK and I'm not sure from your wording whether you meant that or not? If they are cheaper, then, well, they're cheaper. That's gotta be good.

Yep, I did mean they are cheaper, but not by as much as I expected. Thanks for the tips on insulation, have spent many winters in the UK in a flat with poor insulation and it was not pleasant, well for the mushrooms it was...

As for the NZ townhouse - terraced house comparison, I have yet to see any NZ townhouses as small as the terraced houses going for £350K Still, I guess the point about quality stands. Is the leaky home problem still an issue in NZ or do new houses not suffer from this?