Friday, February 27, 2009

An idiot's guide to house prices

I am the idiot by the way. I made this median price graph up for my own use but thought I would share it.
The commentators saying that now is the time to buy, IMHO are jumping the gun.
For the simple reason that graphs do not make sudden changes in direction without good cause. I will be basing my decisions on the middle line as it shows that in 10 years (about the timing to sort the current mess out) this is where house prices should be. Personally I can't see the worst case happening as low interest rates will shore up the market and people will still need places to live. No matter what happens, property will be a long term investment once again. The days of the big jumps like we saw from 2002 to 2007 are gone.


Anonymous said...

I see that the 5 year rates that were at 5.95% are now up at 6.5%.

Is this because so few banks followed or are the 5 year forcasts looking better?


Actually Lou, I feel/hope the market has a bit more to go.
Your scenario looks right.
Maybe late in the year it will reach bottom, or early next.
There's certainly plenty of properties on the market in the BOI and good deals can be had.
But prices seem to be dropping each week with the local property press.

PM of NZ said...

Look at that lovely year on year 10% capital gain.

Makes it so worthwhile being a property owning capitalist rich prick.

Anonymous said...

Worst case going back to 2004 prices?

get a grip

Maybe late in the year it will reach bottom, or early next.

Best case is stagflation. Wages are going to come crashing down over the next two years: the median house price will head towards three times the median family wage. That's around $250K - not $400.

Worst case: depression. You can buy houses in texas for $50. Soon you'll be able to buy houses in Orewa for $50 (if you can afford the related unit fees)

Anonymous said...

Salesmen always say now is the time to buy.

Their incomes depend on turnover.

Lou Taylor said...

There was nothing scientific about this. I just think that graph trends are worth studying as you can get a feel for what's going on. That's why I sold out in 07.
The median price is almost meaningless to investors as they judge each individual property on its merits.

Anonymous said...

The median price is almost meaningless to investors

sure, in which case this graphs are overall.

NZ's average wage is - what - 35K.

two incomes - 70K.

three times that is something like 210K.

If you think your house is worth more than 200K,
you'd better have a damn good reason.

"I'm not a bludget" is not going to be a good reason - bludgears don't deserve their own houses.

Lou Taylor said...

If what you are saying is true anon then there will be many people renting in the future because property will always have an investment aspect. The numbers on the graph are meaningless but the trends are invaluable. If you can pick where the trend will be in 10 years and have the courage to act on that today then that can be the difference between a pleasant retirement and a life on the pension.The good thing about property is that noone can steal it and the historical trends are very strong. I may never see another bubble like the one we have just witnessed but if the fundamentals of low interest , rent return and price stack up over the next couple of years and you back your opinion on what the future holds then you can do well.

Anonymous said...

If what you are saying is true anon then there will be many people renting in the future because property will always have an investment aspect.


fundamentals of low interest

Don't count on this - at least while NZ tries to defend its own dollar. Cash is and always will be king: if it's in US dollars, pounds, or Euros.

PhilBest said...

NZ's housing prices to income or GDP ratio has been among the most unrealistic in the world for years. Our housing bubble is the worst equal with Ireland's and Spain's. Our net debt per capita is second only to Iceland's.

Just to let you all know what kind of company we are in.

Ignorance is bliss.

Anonymous said...

Frankly the most sensible option now would just be to petition Canberra to let NZ join as a territory (our debt load is too big for them to seriously consider us as a state).

And as a territory NZ wouldn't need any local government of any kind, no beehive, no councils, no mayors, no nothing.

Canberra can manage the shift of the productive population to Perth and Queensland much more effectively than any NZ government will have the guts to.