Thought I'd reply to the above responses, in no particular order.
"What a frosty reception. Adam, I thought your post was splendid. Looking forward to more."
Thanks James A. Honestly, I fully 100% expected the frosty reception. I expect no less from participants in a market that's in the midst of a catastrophic bubble. Real estate is an especially emotional topic in New Zealand. Which is why I felt compelled to warn fellow migrants. Because local Kiwis often don't have enough perspective on the subject.
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"Strange topic for a first post, but I'll bite. New Zealand is not the US, the housing market is not the same. For example "Sub Prime" does not exist here. Also the banks, erring on the side of caution, actually check if people can afford to repay loans. Whilst I agree that the Auckland housing market is over heating, a house is only worth what someone is willing to pay for it. Here is a Herald article published last month, describing the fall (gasp) in Auckland house prices! But thanks for the well intentioned post, other people would perhaps describe it as patronising."
Is it so strange? I have become very concerned about the market here. And I'm very concerned for my fellow migrants arriving here. I see threads started by folks happily running to the bank for massive mortgages to buy over-priced properties, and no one is calling that a strange first post. I felt it was really necessary to chime in and offer another perspective. I think many folks who have bought recently in NZ or are about to buy in NZ are making a grave mistake. A house is the biggest purchase one makes in a lifetime. As such, it does not seem so strange to offer some insight into the dynamics of such markets, especially from the point of view of someone who has seen them play out up close in other locations. It is not different here. It is exactly the same. Right down to all the excuses and defenses.
Funny that I question the objectivity of the NZ Herald and I'm offered an NZ Herald article as evidence of the safety of the Auckland market. Again, it only continues to underline my grave concerns.
Again, why is worrying about the over-heated nature of this market patronising? If I were here talking about how amazing real estate is in AUckland and how it can only go up would I also be accused of being patronising? I doubt it. This is typical of a bubble mentality. We saw it play out exactly the same way in other countries we have lived in which have since collapsed in value.
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"Housing crash in NZ? When has there been in the last 20 years? The issue with NZ is 1) it's a very small country and 2) there are measures to quickly restore any housing price correction such as changes to immigration policies. Although i'm against using house properties for financial gain and feel that every family should at least own a roof over their heads, NZ is nothing like in the US which tends to have less regulations in many areas (health, Wall Street, etc)."
NZ is actually much more like the US than Kiwis want to believe. Which is why I decided I had to say something about it here in this forum. I could point to countless charts that prove the point, but most folks just don't want to believe real estate can go down. In this respect alone, NZ is EXACTLY like the US was five years ago. By the way, real estate prices in the US had not dropped nation-wide in the US since the 1930s. So 20 years is nothin'. The 20 years of a rising market is actually what feeds the danger. It creates a sense of complacency that one simply cannot lose in a market (there has never been a market in history of any sort which didn't have risks of loss). Ultimately, I'm offering a warning and a counter-point which migrants should at least consider before tying themselves up in an incredibly expensive, possibly illiquid investment. WHen you come from a nother country, it is easy to get caught up in all the local expert opinions. Ironically, it is often an outsider who sees the dangers that locals have blinded themselves to.
By the way, I've never seen so many folks over-extended in real estate than in NZ. In this respect, NZ really IS different than the US. While the US banks lent widely to some very suspect borrowers, I know students (mature students, granted) here in NZ who own multiple investment homes. Everyone seems to own multiple investment homes here and nothing else. In Canada, where we also lived, I've known very wealthy people who owned only ONE home! They were widely invested in many other things. Here I see struggling lower-income folks owning THREE homes! That is widespread and, to me, it's scary and worth considering as a possible warning sign of a fragile market.
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"I think we're all quite aware that the house prices are quite high. I'm sure the Herald uses the overpriced bubble headline as many times as the crash headline, so I am not quite that into a conspiracy theory. As to whether it is going to 'crash' or just readjust, who knows. I've been waiting for that long prophesied house price crash in London for years, hasn't happened yet unfortunately..." People need to look at what works out best for them, and sometimes the decision to buy or not is not simply financial. For some, renting just doesn't feel the same.Good luck, Daniela
Yes, Daniela, London is still going very strong. Unfortunately, the number of strong, steadily increasing real estate markets in the world is dwindling. Vancouver Canada is now off the list apparently. Things have very suddenly taken a very big turn for the worse there. And I hear all the same defenses of AUckland that Vancouver has been using for years, right up until the last few months where all of a sudden something terrifying is happening in that market. The charts of historical income-to-home prices and rent-vs.-buy prices are very similar between Vancouver and Auckland, and Vancouver has finally reversed what looked like an unstoppable, infinite trajectory upwards. People there are suddenly nervous, and recent buyers who have to sell are suddenly losing big money on their properties. Ironically, Vancouver was right next door to the property markets in the US, and should have known better. Alas, the religion took over there as everywhere. Everyone thought Vancouver and Canada was 'different'.
London is currently benefiting from a lot of big money that is terrified of the collapsing economies in Greece, Spain, Portugal, and even France. London real estate becomes a place to park big money. It's not different there either, though. All markets have risk, and any market that has decades of rising prices without returning to fundamentals is at risk of reversing eventually. THe longer it goes, the more seductive the fantasy becomes, however.
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"Hello and welcome. Interesting first post. Do you feel you've been hurt by buying real estate in NZ? Just wonder where you're coming from on this one."
Thank you. No, I haven't been hurt by NZ real estate, thankfully. We've kept our sizeable equity from overseas real estate and parked it in a very healthy term deposit. That has been incredibly freeing and has allowed us to take the time to examine the local market and make some assessments. We are very glad we didn't rush right out and buy a home here when we arrived. We easily could have and certainly considered it. Instead I feel we dodged a bullet, and so I want to warn other migrants that there's no harm in taking a moment to rent a place and take a look around, do some research, talk to people on BOTH sides of the argument (there are many more Kiwis who will insist that NZ prices can only go up here, so it's important to seek out the rarer opinion to get a balanced assessment).
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Re: Beware also the Kiwi press, which is essentially The New Zealand Herald. We've found it to be terribly biased in favour of their major advertisers--you guessed it, real estate ads.
You're kidding, right?!I work for the company that publishes the Dom Post, among others. I'm sure they'd be rather amused to hear that the Kiwi press is "essentially the New Zealand Herald"
Yeah, you're right, there are two newspapers in this country. In Auckland you never see the Dom Post around though. And that's where I live and where the prices are their absolute toppiest. I remain extremely disappointed by the bias shown in the NZ Herald regarding real estate. In the US and other countries there is often a complicity between the press and the corporate interests who provide most of the profits. That sadly remains the case here, except with a limited number of news outlets I feel that there is actually even more bias, since there aren't any big papers willing to challenge these biases. You never see a front page story of a house that dropped in value in the Herald. But you actually see a front page story about a house that sold for hundreds of thousands over asking. I fail to see how that's news in either case, but the fact it made the front page was deeply concerning to me.
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"Strange first post... do feel free to stop by the Introductions forum and say hello before your next rant though."
Again, how is another perspective a rant? This is a forum for migrants with a big section about Real Estate. I am very concerned about it especially from the point of view of migrants, who might not have the benefit of our experiences and 3 years here. I will probably participate in other topics on the forum too, and I'm sure they'll be less contentious. I will talk about all the great things that makes NZ worth moving to! My concern is that real estate isn't one of those things. Not right now. 'Nuf said.
Good luck all and be informed and careful with your hard-won money. Who knows when you're going to have a million bucks in your bank account again in your lifetime! Spend it wisely!