So I'd "save" 10% on the small portion of loan paid off but would continue to pay 10% on the remainder, all while the underlying asset fell by 15%? Not really a compelling equation.
Printable View
But its only a notional fall in value. The loss of value is only realised if you are forced to make a distressed sale. If your’ not selling you aren’t loosing any value. What I would suggest you are loosing though, is an ability to leverage your equity into other areas – but this is different from loosing value.
Halebop you've been quoting phrases since early 2005 like 'cash is the easiest option', I no longer have exposure to the sharemarket etc, perhaps coincidentally after the first correction of the 2003 - 07 bull market.
Yes cash is 'comfortable' for the moment but medium-long term it is a proven underperformer. It's where and when to put the cash into better performing investment classes that is the question. I agree with you it's definitely not property at the moment.
SEC
Here's a recent news item, question is whether they are just talking the market up or not?
"There aren't enough homes on the market to satisfy cashed up buyers, says one of the big Auckland real estate firms.
A "drought of properties" had been caused by cautious vendors adopting a "wait and see" attitude through the winter months.
The traditionally slow winter months had been made even worse by what Bayleys describes as a "lack of confidence in the housing market.
Median house prices fell by 2.15 per cent in June - from $345,000 in May to $340,000. That fall followed on from a 1.42 per cent drop the previous month.
Real Estate Institute of New Zealand national president Murray Cleland said in a release today that much of the drop in sales volume could be attributed to a severe
shortage of property 'stock' on the market - making buying choices markedly harder.
"It's certainly noticeable that there are considerably fewer 'for sale' signs up outside homes. That's a trend across New Zealand - from the larger cities through to
smaller towns." said Cleland.
Bayleys managing director Mike Bayley said many of his sales people had databases brimming with potential buyers who were struggling to find suitable properties.
"There's no shortage of buyers as far as we're concerned," said Bayley. "We have substantial numbers of buyers with money ready to get into the market, yet there
simply aren't the properties out there for them to choose from," he said.
"We're not talking about buyers without approved mortgage capabilities... these are astute home owners and investors who are highly liquid, have seen that the
market is close to bottoming out after a year of gradual declines, and are looking for somewhere to invest in now.
Bayley said the company's books were "full of these individuals" - inlcuding ex-pats who were returning home cashed up with British pounds or US dollars.
Other investors had sold out at the peak of the market and were now re-entering "at the other end of the scale". First home buyers watching "the affordability gap
close" were also in the market.
"Sales people are pulling out all the stops to encourage vendors to get into the market, but the winter malaise has set in. With the official cash rate dropping last week
and Reserve Bank governor Alan Bollard hinting at a second round of cuts in September, the conditions are certainly primed for our customary winter phase to end
in August rather than October," said Bayley."
You would have had to come down in the last rain shower to believe that desperate load of cr#p,what spin will they come up with next ???.
Cheers
Miner
LOL... those realty people make me laugh. What alot of crap!! They've been talking up the market and according to them the market have never dropped. It was the media that caused the property market to fall from the sky. Abit like the US blaming traders and OPEC for the oil price hike.
Time the realty firms get real and tell the truth. All the smoke screens and crying wolf can only last so long. No wonder realty agents are rated at the bottom of the most trusted list next to rats and snakes.
From a builders view on the market let me put you straight on a few points.
1, The cost of building is going up twice as fast as inflation due to new building specifications.
2, Nobody sells at a substantial loss unless it gets forced on them.
3, During a building slump new homes built wont keep up with demand.
4, If people find it cheaper to rent then shortage of stock leads up to higher rents plus higher house prices.
5, What happened over the last thirty years will almost certainly happen in the next thirty years with prices rents and inflation.
6, The people that delayed buying a house in the past all lived to regret, it some things never change. Macdunk
Hey McDunk, tell that to the American banks holding onto 5 years worth of foreclosure/mortgagee supply of properties no one wants.
I just know that the material input and the cost of compliance is streaking far higher than the inflation rate.
The people coming in later when the storm blows over are in for one huge shock. Its all happened in the past, only this time its different because of the leaky home problem.
I just bought a new house that if i worked for nothing i couldnt build it cheaper. I know what the building costs are, buy below that at any stage in the cycle, then sit back. A few little things to consider.
1, double glazing is an extra 50% which adds thousands coming in now.
2,compliance fees at least doubled in the last three years.
3, Builders gaurantees comes at extra cost.
4 Tradesmen fleeing the country in droves.
Any one foolish enough to think that after this downturn is the time to buy will miss out in a real big way as they have always done in the past.
The only difference in a down turn is you will find more bargains other than that its business as usual with the mugs missing out as they have always done. Macdunk
"I just bought a new house that if i worked for nothing i couldnt build it cheaper. I know what the building costs are"
Hi Duncan,
Question from someone looking to buy a house in the not too distant future.....what is the current rule of thumb as to the cost of building a house?... so that I have a rough idea if I am looking at something it is below replacement costs.
thanks in advance
How long is a piece of string. Its like comparing two cars, one a rolls royce, the other a ford. It depends on so many variables, as to its worth. You cant say $1500 a square mtr is a good or a bad price. It might be a complete bargain, or it might be overpriced, depending on what the make up is.
It takes experiance to understand what each feature costs to build. If for instance its a colour steel roof that would cost lets say $10000 to replace, then the new roof is valued at $10000 but if its 16 years old you can value the roof at $5000. Thats how you go through a property and value each item against its new replacement cost. Macdunk
I think in this market, I'd be offering far below replacement cost for the home(the section is dependant on other factors).
While I do agree that building/compliance costs are exploding, that does not mean they will sell for a comparable or greater value.
I can build a widget for $1.00, but if the market/potential customers are only willing to pay $0.70c for it....either I have to have the risk profile AND CAPITAL to wait until the market accepts my higher price, or I have to be willing to accept the lower price now or when my capital runs out.
I think in the building game, where "other peoples money" is being used to finance spec construction, spec builders can only hang on so long before the carrying costs bury them.
In a REALLY tough investment environment, even airlines can become quite juicy targets for acquisition.
Back in the 1970's several US airlines with huge plane fleets were valued at less than the replacement cost of a mere handful of aircraft...pennies on the dollar in terms of long-term asset value due largely to a gigantic cash crunch and a short-term pounding........not that I would ever invest in airlines :)
In the short-term I think replacement cost is best used as an example of how you can find long-term value, but only buy purchasing at a substantial discount to replacement cost.
We just bought a beach house where I believe we paid a fair price for a substantial and private beachfront section......with a very well built and mainatained home thrown in "for free".
If we had only purchased the section AND had to have a home built to a similiar spec TODAY....we'd be out at LEAST an additional $300k.
Having a home built today is insanity.....when deals on existing homes priced far below replacement cost are just beginning to look intrigueing.......I think once the "catch a falling knife syndrome" has ended in the next 12-24 months those that have been patient will have found amazing value for dollar.......but that "value" may not present itself in cold cash for a decade.
The builders I know working in both residential and commercial have seen their work backlogs disappear......
Just my 0.02c
Thanks for the info people. Gives me plenty to think about. Might have to do some research into house building costs to give me a clearer idea of the components you get for the $. I am in no real rush now....have just found out child number 2 is on the way....so we will be going back to one income in 7 months time! So plenty of time to do some research and try and get the deposit as big as possible.
Also need to do some research on the various local markets we will look to buy in. Either here in the Waikato or over in the BOP. Will also go back and read this whole thread at some stage.
cheers
Cam
Good luck with it all CAM we have all been there one way or another, exciting times ahead.
From a builders perspective, to someone in a different occupation, i will give you a list of doos and donts to take into account, when the time comes.
1,never buy a house that has no code of compliance.
2,always have a builder check it out.
3, leaky homes were all built between 1974 up to 2006 mostly all were spanish style plaster over a timber frame. Dont even think about one of those in that era.
4,Do a REINZ course from home at nights to learn how the legals operate. Its not costly and its a 99.9 pass rate.
5, Work out the life span of each product to see when you are likely to replace it.
6, Remember when buying that you will most likely sell when your kids are at the leaving home age.
7 Your first home should be bought with your kids in mind. Your second home is with all the things you couldnt afford in your first home.
8, When the market turns, which it always does, your saving for a deposit wont keep up. be very watchfull the market will come back later with much higher rate than the inflation rate. It is a long term investment.
I always take the risk out of nasty surprizes by locking in an interest rate that is affordable in the short to medium term, otherwise you gamble with something you might not be able to afford. Who knows what tomorrows market will do, buy at your leasure with your price, sell exactly the same way regardless of what the so called experts might say. Macdunk
Good advice number 1 through 7... poor form on number 8...Quote:
Good luck with it all CAM we have all been there one way or another, exciting times ahead.
From a builders perspective, to someone in a different occupation, i will give you a list of doos and donts to take into account, when the time comes.
1,never buy a house that has no code of compliance.
2,always have a builder check it out.
3, leaky homes were all built between 1974 up to 2006 mostly all were spanish style plaster over a timber frame. Dont even think about one of those in that era.
4,Do a REINZ course from home at nights to learn how the legals operate. Its not costly and its a 99.9 pass rate.
5, Work out the life span of each product to see when you are likely to replace it.
6, Remember when buying that you will most likely sell when your kids are at the leaving home age.
7 Your first home should be bought with your kids in mind. Your second home is with all the things you couldnt afford in your first home.
8, When the market turns, which it always does, your saving for a deposit wont keep up. be very watchfull the market will come back later with much higher rate than the inflation rate. It is a long term investment.
I always take the risk out of nasty surprizes by locking in an interest rate that is affordable in the short to medium term, otherwise you gamble with something you might not be able to afford. Who knows what tomorrows market will do, buy at your leasure with your price, sell exactly the same way regardless of what the so called experts might say. Macdunk
Look mad dunk... when your renewal comes up, go floating and you can pay me the difference between the fixed rate and the floating rate (which is 100% likely to keep falling)...
If its a reversal, I will sign a contract with you and pay double the difference...?
A few pages back I left the web page details for me to be contacted on, or the 0800 number for you to call me on.... hahaha....
Dont pay the banks... pay me instead....
...
Man I wish I coul short houses... damn, Id short sell one right now if I could....
your mate... shrewd...
:cool:
.^sc
Heres a starting point for you – check out all the features used to sell a new home. http://www.stonewood.co.nz/pages/new-home-features.aspx. There’s a huge pick list in there which makes it hard to come up with a valuation as Macdunk has suggested.
Builders know about building stuff but do they know the costs associated with, say programmable timers. Many builders will send your plans to a Quantity Surveyor (often within firms like Placemakers and Carters and they will come up with a PC sum – like $15,000 for a kitchen. They will also send the plans to their subbies – a drainlayer will come up with a price for the drains - say $15,000 for stuff which is below ground which you don’t get to see. So you may end up with $350,000 to build a 230sqm home. The moment you start fiddling with the plans you can guarantee the PC Sum to go up. Small builders won’t necessarily get as sharp a price as a large building firm – but they may not be far off. The building supply firms are having to carry greater credit risk now .
So as a local rule of thumb you can build for $1,000 a SQM for a low spec house, $1500 for a well speced house and if you have $2,000 plus a sqm you will end up with something pretty special.
Cam
You might find this of use:-
http://www.dbh.govt.nz/bofficials-es...building-costs
cheers
You can. Just short CDI, ING, KIP etc. :)
Looks like cost of construction is coming down big time. :) Maybe time to built myself a house. Na, only joking. Building a house is just a total headache, done it before and will never do it again, unless I have gone completely bonkers.
10,000 out of a job as housing slumps
Almost 10,000 construction workers have lost their jobs in the past year as the downturn in the housing market bites.
http://www.stuff.co.nz/4647505a13.html
The thing to remember when you say 10000 workers lost their jobs is that they either get out the trade or go overseas. A very large proportion of that number is lost to the industry never to return. when the market turns which it always does, this will inflate house prices at a much greater rate than ever before.
With all the lack of knowledge in the industry by the rule makers inflating new building costs added to this home ownership will be confined to the rich. I can see a major crisis looming with unaffordable rents and house prises resulting in a great exodus overseas by our young people who will be replaced by rich migrants. Macdunk
I would disagree.......
I'm already seeing signs(with my eyes from my perspective so it doesn't mean I'm right) of softening rents in my area.....largely due to homes going unsold and now available to rent.
Available rentals property numbers are growing rapidly in my suburb.....in recent years there have been practically zero as most were rented before being listed.
Same goes for commercial.....in Christchurch along high profile areas like Moorehouse Avenue it was extremely rare to see a For Sale or For Lease sign until deep into 2007.....now it's a completely different story.
In my opinion, I think you are off the mark(at least in regards to Christchurch, but I think across the nation on average) and that your take is overly optimistic.
I think there will be a LOT of money made via incredibly shrewd buying in the next few years, but the profits will not be able to be realized for quite a few years....and I think the building industry is going to be further culled from the indications I'm seeing.
With few exceptions, I believe new construction in the current environment would be madness.
Though interestingly Foodstuffs, Ngai Tahu and some Singaporeans are about to embark on a 20 year project building another 2500 homes in Christchurch when we already have Pegasus town (1800 homes) under way and plans for Wigram (2200 homes). And at a time when REINZ report 950 sections sold in the previous year for the whole of Canterbury and Westland.
It's a strange one eh?!
I have a mate/customer who did extremely well selling much of the property being developed for Pegagsus Town Village, and I have a planned/booked business event with Wigram facilities that may be impacted by the Ngai Tahu residential development.
I simple cannot fathom how these very large developments are going to be sold profitably in the short-to-medium term.
LONG term I think it will pan out......but even with Christchurch Women's Hospital pumping out babies in overdrive I just don't see the demand for such large amounts of new inventory when the net import of new property buyers has swung so low again.
It doesn't add up to me....far, far too much new inventory in the short-to-medium term.
I note that Golden Homes are offering to build a new house for less than $800/m2. Given the glut of sections available, I should be able to buy a section and build a nice 200m2 house for not much more than $300K here in Rotorua. Or am I missing something? I know spec houses of this size have recently been selling here for $500K-$600K and more. Are house prices going to fall as quickly as oil prices seem to be falling - perhaps they were both artificial bubbles. Some commentators have been warning for a long time of the potential for a huge fall in property prices - eg http://sra.co.nz/pdf/housinghell.pdf. If this happens, the consequences for highly mortgaged owners and for the NZ banking system which carries this $100b+ debt could be pretty awful.
You gotto be crazy to pay $600k for Rotorua unless it is water front.
First homebuyers screwed, in one year Plus turning shrewd
My examples are for first homebuyers...
other market participants will not fit into this category.... EG, traders, fixed interest rate holders, buffs, long term holders, renovators, big cats developers, long term investors, developers, king pins in operation, multi home owner_______ etc etc etc....
(mack-a-dad-unk-)... this means you.... you big fish in a small pond......
Ok... Today I went out for lunch with my great mate... Last year near the peak he was on the brink of buying... 'I forced him out'... today he told me he bought... at first ise outraged... rampaging... lost for words... not happy... the story he told started to unfold much better than what it was even 6 months ago (when he wanted to buy)...
his circumstances were not all about money etc... family etc...
Ok... house- went for auction at 300k, 3 accepting bidders... all fell through on finance... after that, then went through on market at 270k on open home...My buddy put bid in at 230k... came back at 240k...then 233k... "sell".... I went around and seen the house and saw what potential this house held...
not good area in Christchurch... shirley.... surrounded by state owned... best house in two blocks... 3 bedroom, two double rooms... garden, newish kitchen... 300 per week for 30 years (to pay house off in that time (including interest).... rent (otherwise) half that plus two rooms rent... so perhaps my buddy scored...
Im convinced he will go floating on my advice... I will free carry him if im wrong, its just not possible (with one more rate cut this year)...
....
So, from one year onwards, first homebuyers (in particular) will become screwed turning shrewd as predicted because the market topped out, and in some circumstances houses are being sold on a forward basis of slashed prices of 10% already being factored in... ie... the sellers save the wait, while reinvesting their money at the current deposit rate and making money while market is in limbo... so factoring in further cuts in housing prices as a given with a shot of making money back through reinvestment.... (smart move)... My dad made the same tough call... valued 610k... sold 500k flat... thats almost 50k (b4 tax) next year while market likely continues to fall, or at major major major best market goes sideways....
My buddy will be worse off in the near term... much better off in the long term, perhaps indifferent if all the dots can fall into place... IE renting both rooms, interest rates continue to fall, suburb already sold down and factoring in further slashes (not like that of guns and roses) ....
I hope he is still prepared for prices to fall much further...
In general I have been learning much about shocks in the market impacting on interest rates, output of the economy, LM, and IS curves (its a given bar nothing) I will bet on it if a buff is prepared to take it up.....
EG, sell it to the grandma (off current info) type stuff...
info does change... so if you are that sure (buff) lock it in now...
next year (with further rate cuts, which are a given), it will be a great time to buy...
Minimoke reckons Im A talker... reckons I will stand by and watch the rebound... reckons all sorts............... you watch buddy...
first home, looking for 3.... and those that cant do teach, right?
With a name like that you should become maximoke...
haha... all in good notion.... good luck to all, no matter how trigger happy you are... bang bang... when are you first homebuyers going to pull the trigger????
I hope not for at least another year...!
Re-address the situation in 6 months, perhaps things will change then...?
hummm.....
bang bang...
when?
:cool:
.^sc
Hopefully you have deep pockets! Here’s why: currently ANZ rates are 10.95 floating and 8.95 for a 2 year fixed.
If your mate fixes for 2 years he’ll pay $35,800 on a $200k mortgage.
If he takes your advice he’ll pay $21,900 for the first year interest on a floating rate. And say the rates drop a whole 1% (which I don’t think they will) he’ll pay $15,900 if he fixes for 2 years in a years time. This means you’ll have him paying $37,800 over the next two years.
So on your advice he’ll pay $2,000 more and he’ll be playing the interest market and wondering when to best time his move – only to find he’s miss timed it and lost a couple of K along the way.
Each month he follows your advice he’ll be paying $333 more in interest. Any drop in interest rates has to be large enough to recoup that loss – and this is without factoring the compound effect of reducing his mortgage by this amount each month in the meantime.
$700k with not views in Rotorua!!??? :eek::eek: You can get a nice place in Mission Bay, Orakei, St Heliers, Remuera for $700k. :)
I think maybe it is time to start looking at property again for the long term portfolio. I cant guess the bottom of the market, but the interest rate continue downtrend should help stimulate the market.
what about this example,Quote:
minimoke...SC – looks like we still haven’t gotten the distinction sorted yet. You can only own one home at a time – the rest are “investment “ properties. Both two quite different things!
three homes...Live in one home, Monday through wednesday....Thursday and Friday in the 2nd home... and the weekend at the third...
:D
.^sc
Or a normal home, a weekend 'country' home, and a holiday home ;P
The lack of property development will have a supply crunch of new housing onto the market in the near future. I cant really see any properties being developed in this environment. Any thoughts?
Personally, I think builders will be in limbo for a few years.
The cost of materials isn't dropping.
The cost of building labour isn't dropping.
BUT the cost of existing homes IS dropping.
I reckon quite a few builders are going to be living pretty thin off of buyers who purchase existing homes cheap and retain a builder for SOME renovations to suit.
I just don't see the immigration "tap" or overseas homesick Kiwis turning on in any level of volume that will help builders in the short-to-medium term.
And I think it's due to two reasons:
1.)a massive overbuild in new housing....with yet more to be delivered and in the planning stages....at least that's the way I see the greater Christchurch area.
2.)residential property prices reverting to the mean(and quite possibly overshooting to the underside along the way)
The property market is in the process of attempting to digest a gigantic bowling ball of both new and existing home inventory.....a bad case of indigestion is inevitable.
One thing that could help in 3+ years would be a new government turning on the immigration tap in a fairly significant way as the Kiwi drops in the toilet...I'm not condoning such a policy, but it would likely help builders still solvent in several years time.
Just my 0.02c
I have started looking seriously into the property market again. Property is long term, who knows where it will go in the short term. It is impossible to pick the bottom. As long as the numbers work for you, then it is a good investment.
I think National govt will turn the immigration tap again to stimulate the domestic economy. Without immigration, Auckland is stuffed.. LOL
dr who,
Perhaps we have our first bear turning buff?
Humm... You are on the right track, I still think you are toooo early
At this stage, late next year I will buy (I have no choice until at least Jan/Feb/March when I start to have an income)....wait my friend...
You will be well rewarded if you do.The US house market is 2 year ahead of us and houses have only been falling here for 6 months... market still way overvalued...(in the near term- not in the long term)...
... if you dont mind it falling in value abit more then buy now... long term you will be up regardless...
With Technical analysis there is a simple rule.. buy when the asset is rising... sell when the asset is falling... If you wait for the asset to stop falling and start rising then you will get in on the uptrend, and you will still buy it below todays price...
theres no telling how oversold housing could become if it really got bad...
My good buddy made a bad move even though he bought at a cheap price (as per my example)... the only way to really know, is to wait and see...
all the best... later...
:cool:
.^sc
Strat,Quote:
strat-Wow Shrewdy you are really taking this TA thing on board. Dont let Tricha find out :D
May I ask what stats you are using for your TA analisis in the housing market?
I am deadly serious about TA, but I have not done anything about it yet...
Im speaking pure off the top of my head and I have no stats to go from for the housing market, or any other market... im using a good dose of intuition only... it pretty much just flows straight out..
All my posts are based on this style...
It does not make sense buying a house now given that the housing market has fallen for only 6 months after the biggest bull market of all time...
The market willnot go straight down, there will be waves...
An interest rate cut, will cause some people go out an buy a house (usually the most desperate ones).... once that wave is churned through, the sell off continues until the next wave of good news with a short rally...
Im studying TA in November...
I follow pure sentiment, and intuition...
Im buying late next year, or early 2010...(at this stage, I will address the situation early next year)
any advice is greatly appreciated.. I do not accept advice such as its never a better time to buy than now...Or buy a house at any time, I am not a housing businessman....
I can time an entry into the market better than a bull can, because they are biased and are therefore short sighted....
Other advice would kindly be greatful....
What are the most important things I should look for when buying my first house?
:cool:
.^sc
theres absolutely no point buying a house until the US market turns...
The New Zealand market is two to three years behind the US...
we are 6 months in and people are buying...
your mad, or your a housing businessman, (and therefore you are so good you will perform at any stage of the housing market)
This is true for the local Buff... Im not taking the mickey...
at this stage of the game, a first homebuyer must take every little chance in an effort to save up to 10 years off the total loan term... once your setup running with 10 houses--> interest rates, fixed or floating, bottom of market or mid market, are neither here nor there...
it dont matter... it really really matters when your just making your first move... buffs tend not to understand idea very welll...
anyway, id appreciate any ideas for the question....
What are the most important things I should look for when buying my first house? thanks...
:cool:
.^sc
Im sure there isnt much you havent already given the once over Shrewdy except maby that you should be looking closer at the area/areas you intend to buy in. The market retrace is specific to certain areas. Some more than others some not at all. Your timing will need to reflect what is actually happening in your targeted areas. When the Market turns for the better it will be the better areas first Worst areas last.
What to look for? location location locayion LOL
Do ups can be more hassel than they are worth. They almost always come in over budget in terms of both $ and time.
Rent return and total expences. The math must add up if you wanht it to be a flexable investment. Say you decide to bugger off to China for 6 months. It needs to look after its self both financially and in terms of time input. Too many people dont include there own valuable time in assessments.
Full sections that are subdividable or in areas that may be due a zone change. You dont have to do the chop but the value will be there when you sell.
Lots of bedrooms and the worst houce in the best street you can afford.
Thats my 2c worth:D
If I were you I would be waiting awhile yet too.
I came across this the other day, interesting data...
http://www.interest.co.nz/gallery12.asp
FD, I think that graph has been distorted to paint a unrealistic picture.
I have some very good graphs that states the Ak area percentage change in house price index is starting to bottom out soon. It is in pdf form and I dont know how to copy and paste onto a SH post.
Hi Doc,
I have found most housing stats all but useless. Property and Area values are just too diverse to draw any useful conclusions. The only way I have found to estract any useful data has been to beak data down into suburbs and include detailed specs on each transaction.
Shrewdy, this is a good site with a few smart cookies in the Membership including Olly Newland
http://www.propertytalk.com/forum/forumdisplay.php?f=80
SC Probably not a lot more to add to these great suggestions.
I’d be looking closely at the size of your cash deposit and likely net income (including from flatmates) Of your deposit – cut a chink aside for incidentals. Its surprising how the lawyer fees, rate bills and immediate fixer uppers (including tools) add up quickly and cash can be a useful tool for getting a good price. Alternatively be prepared to add these costs to your mortgagee and amortise over the period of your loan.
I’m still not clear if you intend living in this place or not. If you are then you will have difficulty claiming expenses as a business expense – not impossible, but you will have to look very carefully at how you structure things.
Obviously once you know your cash position and income you’ll know the size of the mortgage. I’ve said earlier don’t worry about the term of the loan – your going to be in debt a long time if you want to get into property. Get the biggest mortgage you can safely afford – this will give you more options. But make sure you allow for the risk of your loss of income.
Now focus on good suburbs with land. A poxy 450sqm section limits your future potential. I’d be going for the older house on the larger land rather than the new house on the smaller land. You’re going to need flatmates for a while so you’ll need a place that is marketable – so it needs to be close to their workplace and amenities. You’ll find a cheap place in Kaiapoi but a $80 cab fare home after a night out isn’t going to appeal!.
And you need to get your nose out of your books and learn how to use a hammer, spanner and paintbrush. Start collecting decent tools – you’ll need them to save yourself the cost of a tradesman on the many simple jobs that will crop up.
Strat and Minimoke,
Thank you for your advice... I appreciate that...
Minimoke, I do intend on living in my first house...
strat, that forumn you directed me to looks diserted...
similar perhaps to the last Auckland meeting..
Dr Who, You can get in touch with me through PM and I'll post your graphs...
Financially dependant, hummm yes... some very interesting graphs and trends going on there...if anyone believes the housing market is bottoming out, then check out FD's link and look at the 2nd graph...
the 5th graph has gone off the chart... haha...
all very interesting...
:cool:
.^sc
It is all so obvious what is going on. First of all house construction costs are going sky high placing young couples in vulnerable financial positions with home loans. The country economy is grinding to a halt placing young couples on the financial scrap heap. The loan sharks are going under with motgagee sales on properties in ever increasing numbers.
Fanny and Freddy May in America have been bailed out by the Govt which is a short term solution to a long term problem. We in NZ are in the same boat with people over extended waiting on the next hiccup before joining the mortgagee circuit.
The very same people who understand the property market are buying up at below cost prices waiting on the market to turn in a few years, then cream the same silly punters all over again. Like i keep telling SHREWDY a bargain can be found in any market, if you keep looking. If you take all the money from everybody and give it out in equal proportions the very same people will be filthy rich or filthy poor in a few short years. Macdunk
Good calls Strat, Minimoke and Duncan... Pretty much agree with all of your comments.
I also think end of next year could be a target for me... Use some share profits to pick up a second... Waiting for some clear direction though (the next interest rate cut should be interesting).
next RBNZ decision is tomorrow...
:cool:
.^sc
Auckland house prices up although on the lowest volume in 26 years,
http://www.landlords.co.nz/read-arti...rticle_id=3307
I could be worried if I was a first homebuyer but any technical analyst would
tell you that a rising share price on low volume is a sign of a possible retracement.
The prices in 9 out of 12 areas did fall though.
Interested to see how this all plays out.
I have been attending a number of auctions and property sales this year. I am one of the lucky ones who do have plenty of free time. It is interesting to know that most of the good properties in good areas have been selling at surprisingly good prices. The not so good properties cant sell at all. Buyers are very picky, but the good ones do go for a good price in AK.
I have started buying residential properties again.
Was listening to Bollard today.
He's thinking a 15% decline in nominal terms, with us about half way through the downturn.
Thats more pessimistic than REINZ (you cant trust Murray) who said he sees it flatting end 08/early 09.
I think the RBNZ is being even being optimistic...cost of credit will stay relatively high, watch the outflow of the japanese housewives money.
Give it another 18 months, 20% nominal, 30% real and we'll be chatting.
http://www.nzherald.co.nz/nz/news/ar...ectid=10533430
Good news?
I wonder how cheap the 60 completed houses go for.
It will be positive for the property market in the long run if we let all the weak, highly leveraged companies go quickly. Lack of construction will mean a sudden stop of supply onto the market. Demand will pick up again once interest rates starts to come down to a level where it will make sense for people to look at investing again, which is not too far away.
IMHO the property market has a lot further to fall (I have literary bet my house on it). Banks are unable to pass on any RB interest rate cuts because the money is coming from overseas and is getting more expensive.
We are getting into spring and home owners that need to sell are feeling a little optimistic but the longer the summer drags on without a sale the more desperate they will get. So I think going into next winter when sellers market denial has disappeared it will be the start of bargain hunting time.
I live in the area and am familiar with this site.
I went to have a look at the development about 6 months ago. The houses are built so close together you would hear a cat sneeze, and I cant personally see why anyone would be interested in living in close proximity like that.
The elevated sections would have a nice panoramic sea view but the competed projects were going to cost in the million$+/- range.....
Some of the 60 houses on the ground level have been sold, so those owners will be in a terrible mess now. Unable to sell, and without the promised facilities - pools, gym, etc, etc.
This was a too ambitious scheme for Orewa IMHO.
Not sure how involved BNZ bank are, but they will be trying to get something back whatever it takes, which will only add additional distress to actual owners.
The ones they had on TV last night had cracks appearing on the walls already and rusty bits ..... another leaky building disaster by the looks of it
.
I thought they were using Linea boarding...........but there may be some rendered sections which could crack. Its close to the sea breezes there, so unless its galvanized, its rusty in no time.
The local council are very worried about what will happen to the site, and its such a major development who would take it on board in this environment.
All good stuff Dr. Morgan
http://www.stuff.co.nz/4702827a1865.html
looking for 45% correction and we are a fifth of the way there!
We've seen this all before.
Banks fell over in 87 and 97 and the world recovered. If you bought during the period of a crash and have the holding power, then you will have done very well. 2008 is no different. This time round it is the investment banks and not the trading banks. We will recover and the world will continue to move along nicely once the dust clouds settle. Those that have picked up some cheap assets will enjoy the benefits.
Obviously thinks people are that dumb or touting for business:
http://www.stuff.co.nz/4712588a13.html
Good time to buy house says Pero
Mortgages are still competitive and available, but first home buyers may need a bigger deposit, mortgage broker Mike Pero says.
However, if people have enough cash it's a good time to buy.
Mr Pero told Fairfax Media that in the wake of the subprime crisis it was obvious banks in New Zealand were tightening their lending criteria.
The days of 95 to 100 percent mortgages were gone and they were rigidly back to 90 to 95 percent. All bank set criteria for getting a mortgage would now be insisted upon in every case.
People who three to six months ago could have got a mortgage will now find they have to save a bit harder first.
But Mr Pero said earlier generations of home buyers had to save for deposits before buying.
"What we've found over the last few years is that people decided on a Sunday afternoon over a latte or wine 'hey why don't we go and buy a home, we haven't got any money' (and) wonder into the bank or broker on Monday and you could do it on no deposit."
Now people would need to have a good credit record and deposit, as in earlier days.
"It used to be a lucky day when you got a loan, it wasn't just a right it was an absolute privilege and it could go back to that."
For existing home mortgage holders the current credit crisis may not have an effect, as most bank mortgages assure people of money for 15 to 20 years.
Developers with short term financing and people dealing with non-banks might find it harder.
"For the average homeowner it shouldn't be an issue," Mr Pero said.
He was "pleasantly surprised" banks were still competing with competitive rates to attract good customers.
While house values were dropping, the New Zealand banks were acting responsibly and not panicking with fire-sales. Mortgagee sales were up but there was no rush.
Property values in places were down by up to 30 percent but "sadly that's life" and there was no actual loss unless somebody tried to sell their house.
Existing home owners, if not planning to move, were unaffected.
"If your house value drops $100,000 over the last few months, you will probably pick it up and it will all come out in the wash over the next few years.
"If you are a first home buyer now is a good time to buy."
Mr Pero said the US subprime system was reckless and irresponsible and would never have happened in New Zealand.
"It's a shame New Zealand is going to suffer as a result because I think across the board here it was generally good lending."
Mr Pero is inconsistent.
'If your a first home buyer, now is a good time.'
To me, its obvious to expect first home buyers would be the most vunerable to adverse conditions.
Then Mr Pero says:
'It's a shame New Zealand is going to suffer as a result because I think across the board here it was generally good lending.'
First, New Zealand is going to suffer..hes predicting NZers are going to suffer financially, but yet advocating first home buyers to buy! Crazy. Yes first home buyers are less settled have less work experience and usually first to flicked out of a job.
Second, Didnt he just say banks were lending at 100%? Is that a good lending practice at the top of the business cycle?! Some banks (as MacDunk will tell you) were lending 105%. Ok I'll tell you....it was Westpac.
I guess if it all goes bad for those first home buyers on his advice, Mr Pero will say 'Sadly, that's life.'
Also, I love it how we (the young) always get generalised into the 'can't wait, must have' catergory. It's through the work of our elder generation from which this has been possible. Ie. Easy credit. Its also through the work of our elder generation which has lead to this housing bubble, and essentially passing on the debt to the younger generation of New Zealanders.
Here are some things to remember:
-You got paid to go to university
-House prices were in muliples of 2-3 times your income
What a rant.
ASB is as of today restricting all home lending for new customers to a maximum of 80%.
Asteron is bailing out of the home mortgage business........no new customers.......but will continue to service existing ones
So Shrewd Crude may have lost his opportunity. It looks like by the time he is ready to buy he’ll need to scrape up a larger cash deposit than envisaged at the start of this thread. The drop in property values won’t make up for this. A $300k house he might have needed a 10% / $30k deposit. If this house drops in value to $250k he’ll now need a 20% / $50k deposit. It might have been easier to ride out a $50k loss in property value than find an extra $20 in cold hard cash!
Saving for 20% deposit isn't hard even with high house prices these days.
I think they should make it 30%..covers the potential fall :)
Thanks for that Cam...
Humm... I wonder why....Quote:
decision last week by GE Money Home loans to pull its 2 and 3 year fixed mortgages.
Credit is going to get a whole lot cheaper...;)
Hey mini...Quote:
minimoke-So Shrewd Crude may have lost his opportunity. It looks like by the time he is ready to buy he’ll need to scrape up a larger cash deposit than envisaged at the start of this thread. The drop in property values won’t make up for this. A $300k house he might have needed a 10% / $30k deposit. If this house drops in value to $250k he’ll now need a 20% / $50k deposit. It might have been easier to ride out a $50k loss in property value than find an extra $20 in cold hard cash!
The only lost opportunity was buying any time after I started this thread... Theres still lost opportunity through going out and buying now...
Still a good year to go before urgency is required...
A larger deposit is neither here nor there for me...
Ive got my 30k, and I will be full time working next year so add 10k...
and then performance on the sharemarket.. At very worst under extreme circumstances my portfolio could go sideways... I doubt it....
DOW could fall through 8500 points...
Oil could hit 70 bucks... doesnt matter....
House prices are falling all through the Western World...
As Foreigners make up a part of our housing market---> when overseas prices fall, those foreigners would sell New Zealand Assets to buy cheaper ones overseas...
This will continue to put downward pressure on NZ homes, compounding to the current state of the NZ housing market...
The US market has been falling for years and we have only been falling for 9-10 months...
exciting times ahead for those that wait...
everything is on track mini... dont worry about me...
hey look... dow down 350... yeah harrrggghhhh...
:cool:
.^sc
SHREWDY, The only thing you have to consider in a long term house investment is construction cost. Buy a house like i have recently done at below construction cost, and sleep easy. Construction costs seem to keep rising along with rents. The markets will crash, or inflation goes sky high, or we head into a depression, your house will always hold its value. The only thing worth anything in the end are essential material assets that are held long term. YOUGOTTAHAVEAHOMESHREWDY even a bird builds a nest before it starts a family. Money is a promise written on a bit of paper that can blow away in the wind. bricks and morter my good man are a much safer bet. Macdunk
I agree with Mcdunky. Buy below construction cost in a good area. In a good area there will always be demand and it is easy to rent rent out. I am now looking and buying. Why? cos everyone says it is a bad time to buy and the fear factor will sell me good cheap property below construction cost. :)
Hey Mcdunk, how much will it cost to build a decent 3 bedroom house these days in Epsom, Remuera etc?
1) The only thing I care about is current sentiment and where prices are headed over the next 3 years to time entry at the lowest price so I can hold for the long term...Quote:
mackdunk-
1)SHREWDY, The only thing you have to consider in a long term house investment is construction cost.
2)Buy a house like i have recently done at below construction cost, and sleep easy.
3)Construction costs seem to keep rising along with rents.
4)The markets will crash, or inflation goes sky high, or we head into a depression, your house will always hold its value.
5)The only thing worth anything in the end are essential material assets that are held long term.
6)YOUGOTTAHAVEAHOMESHREWDY even a bird builds a nest before it starts a family.
7)Money is a promise written on a bit of paper that can blow away in the wind.
8)bricks and morter my good man are a much safer bet. Macdunk
2) I sleep very easy... yeah haarrrghhh... "buy an asset below future earnings and sleep easy"
3) refer number 1)... will input prices such as wood, brick, Steel and all that not fall in a recession? what have these prices been doing in the recession? are costs RIGHT NOW rising or falling?
4)Will that house hold its value? what about this year?
that inflation you are talking about is erroding away at your house value..
inflation pressures are falling...
5) refer 1) and 3)... ITS NOT ABOUT LONG TERM, ITS ABOUT CURRENT SENTIMENT... I suggest you add fruit loops and soy milk with your breakfast...
6) yes, and birds also regurgitate food to their young...
Ive explained this all before... Your $100.. (or what Im currently paying $80) per week goes down the drain.... YES.....BUT, its what you can do with the money you did not put into the house deposit, that you can use to work for you...
If you bought that house then the money you have goes into the deposit... So not only are your returns in housing currently getting erroded by falling prices, your returns are getting erroded by your opportunity cost, (and inflation)... its what you could do with that deposit had you not bought the house... For example... if your deposit is $30,000... and you can return 10% after tax per year... then you return $3000 dollar per year, or 60 bucks a week making renting subsidised by your returns...
rent is effectively free for me right? perhaps not in the last 2 months...
those high interest rates are a killer for the Fixed termers eah!
then theres all the other costs...
there will be a time to buy housing (for the average punter)... there will be time for the average punter to return in housing and the sharemarket... They both wont perform in either now...
7) true...
8) maybe so... but I can afford to take risks in an attempt to cut that loan term in half and evade the mid life crisis...
Mackdunk,
we face the same recession even though we are in different asset classes... Dont tell me that its good for housing and not good for shares...
Dont tell me that its good for you and not for me...
Housing has been dump trucked this year... The Sharemarket has been dump trucked this year... So you have performed this year in house, and So have I on the markets... AKK, WHN, LMPO, LMP, RPM biggie... all profitable... ...VPEO sideways for me....
losing on CUE, CTP, CTPOA, TEXO... last three are all small positions....
and then theres 07, 06...
CUE done well considering when I got in and how much the DOW and Oil has fallen since... down around 16% on that...
Yeah you can find special investments... I can too...
Gotta shoot... catch you up...
:cool:
.^sc
i see that the tele had a 2005 re-run of location location location on again this morning.
is this to drive up the market, or a bit of nostelga about the hey days of speculation?
Mackdunk,
I have not finished with your brain yet... :D...I see you posting elsewhere!...
You say construction costs keep rising, BUT Whats happening to those costs this year? and more importantly RIGHT NOW?
And have you implemented Fruit loops into your diet as I suggested?...ITS a good source of fibre, so im told...
what are construction costs such as steel, wood, commodity prices going to do over the next year?
And with less projects on the offering, what are builders going to start doing to get projects?
Please come back...
http://www.aussiestockforums.com/for...es/charley.gifAerrhrhrhjjjjggghhhhh ititssss ssscccaarrryyyy iiiinnnn hheheheererereeeee..... where have my shades gone?...OH
just found em....
:cool:
.^sc
SHREWDY, I will give you the low down on building costs from todays costings to the costings of say thirty years ago. Forty years ago i could cut on the site and construct a 3brm family home with a boy in six weeks from a simple plan and specifications without nail guns,and other expensive machinery. Today the plans and specifications are right down to the last tiny detail and get sent back time after time until they do. The plans consents and specifications take a huge part of the budget in comparrison. Yesteryear galvanised brackets were the norm unlike today where its stainless steel every thing. Todays house in comparison is much more expensive and time consuming to build even with all the modern equipment but no better than they were fifty years ago. You never heard of leaky homes in those days. the builders knew that untreated timber must breathe unlike today where the powers that be are a bunch of jumpted up idiots. To buy a house where costs are escalating is a wise decision at any stage in the market.
I hate to think how many times i argued with building inspectors about leaky homes long before it was a known problem. To buy a house under construction cost is a sound investment for the future at any stage in the cycle. If you are in the market never ever buy a spanish plaster type house unless it has an external air cavity to allow it to breathe otherwise its a leaky home. Watch out you dont miss the market you will never catch up. Macdunk
mackdunk,
thanks for post replying... It was not the answer I was looking for... It was not even close to the question that I asked...I read the first line "I will give you the low down on building costs from todays costings to the costings of say thirty years ago", and was thinking about not reading the rest....... Come on buddy... I dont give a cock a hoot about 30-40 years ago...30 years ago had nothing to do with the point im trying to make... You say construction costs only ever increase... Im saying you are wrong (over the next few years)...you surely know what construction costs are doing this year dont you?... you dont need me to spell it out for you... Do you?
You just cant admit it... You never give an inch on anything that remotely conflicts with your point of view...
Just admit it... I would have made the biggest mistake of you life had I bought at the beginning of this year when you said those famous words...
:cool:
.^sc
here were the questions...
You say construction costs keep rising, BUT Whats happening to those costs this year? and more importantly RIGHT NOW?
what are construction costs such as steel, wood, commodity prices going to do over the next year?
:cool:
.^sc
Shrewdy let me simplify it for you. Construction costs regardless of material costs have gone right through the roof. Your builders are all leaving town the market is in a downtrend. The only people left selling in the market are the over extended or builders getting out the game. It all comes back to bite you on the bum. Trades people get paid twice as much in Australia. In 1967 I left NZ in a big downturn in the building game and got paid exactly three times as much in northwest Australia. I got back in 1972 and could name my own price in the NZ market. History repeats Shrewdy watch out you dont get to smart and miss the boat. The sharemarket is dogs tucker the best bet is picking up a real house bargain right now. If we have a real depression which looks highly likely the only thing worth having after your share market plummets is material assets. Macdunk
In a "real depression" would house prices not also go down in value?
In a major deflationary or disinflationary event.....which we are conceivably in for the moment....anything requiring credit would be under pressure to drop in price according to my logic.
I do agree that critical "stuff" will hold it's value, or increase in value against paper currency once we've found bottom and inflation kicks in again.
But I think real estate re-inflating will be harder and slower than other tangible assets especially those that do not require credit.
Everyone needs a place to live, but I think a purchased home will not be viewed as much of an investment in the short-to-medium term.....I think we are a long way off from seeing residential property prices even begin to trend upwards.
In terms of capital gains, we could arguably be dead for YEARS until the dust settles.
Our old home isn't moving, even with a VERY sharp price :( oh well.......always a place to put up the in-laws :)
Funnily enough our last remaining commercial property is receiving CRAZY interest...two more offers due tomorrow and a meeting with one buyer's group........still silly low yields being offered in quality commercial......we realistically expect to be out of commercial completely in a month.
If I was a potential home buyer I would be nervous about the current situation.
But it would be vital to save AS IF one did have a huge mortgage, that is to
save the difference between the rent and what would be required to service a
typical mortgage plus insurances, maintenance etc. Do the hard yards involved in
house hunting and pick your spot - this could be some time away I feel.
Who is going to buy all those houses where the developers went bust, surely prices
must drop, possibly quite a lot and for some years to come.
However, our house which has a latest valuation of 315k is now 'valued' at 340k
according to QV. I can't believe that we could get that in today's market and
wonder if they serve any useful purpose as a valuer. It means our 20% deposit has
grown to 33% and by next June will be 42% but if the 'value' goes up even more
we could be down to 50% - fantastic, but perhaps unrealistic at the moment.
If values drop however, that equity instead would decrease to possibly 10-15%.
But as long term holders we can only pay down the mortgage as fast as possible
while enjoying the intangible benefits of home ownership.
The worst that can happen, apart from both losing jobs, is that we will look back
with the benefit of hindsight and see we paid too much and could have driven a
harder bargain.
George
For the March 2008 quarter the Producers Price Index (PPI) for inputs measuring the production cost for residential construction increased 5.1 percent, and labour costs (as measured by the labour cost index - salary and wage rates) increased 3.4 percent for building trade workers over the year.
Other statistics show that prices for the purchase of new housing increased 1.1 percent in the June 2008 quarter, following increases of 0.9 percent and 1.3 percent in the March 2008 and December 2007 quarters, respectively. 93 percent of respondents cited higher prices for construction components as a contributing factor to the increase.
not sure why your haggling about construction costs
I expect that soon enough you will be able to buy a house well below the section and constuction costs - why do people assume that the minimum price of a house is construction cost?
When someone is forced to sell a house they'll have to take what the market is prepared to pay - that's hasn't got much to do with construction costs.
.
Minimoke, you say that your QV value is 50% off - do you
mean less than market value? If so, how do you know what
your market value is?
Our QV for rating is 315k while the 2004 value was 235k,
yet our rates only went up $140 for each year.
The 340k value was based on their latest report, which I
frankly find laughable.
George
MICK, Property is a long term investment for most people. When the price drops below construction cost, construction stops. The tradesmen are left with the choice of going overseas, or working for nothing, or changing occupations.
This is always followed by huge increases in property values when the market rights its self. Its happened to me more times than i care to think about. To buy below construction cost at any stage in the cycle ensures that your buy will go up in value at a higher rate than whatever the mortgage rate is, at that particular time. To place a large enough deposit on a property so that rent and other expences are covered, then refinance every three years to get your own money back you can sit back to the dumboes way to riches. Its a bit like shares buy when the market is low, sell when its high but dont be stupid enough to think you will ever pick the market at its extremities accurately. Macdunk
QV, is a value taken from an office desk using a set formula which in most cases is well off the mark. To get a realistic value your property must be valued by a person qualified to compare your property with other similar recently sold properties after a rigorous inspection. The value of anything is in the eye of the beholder. Macdunk
The QV is less than market value – with market value being my estimation of the value. My valuation is based on keeping an eye on the local real estate market which involves checking listing prices, sale time and sale price relative to the property offering. I’m one of the nosey parkers that turns up to open homes to check things out. I know the sale price of pretty much every property within a 1 ½ - 2 km radius of my place and I’ll look as far out as 5 kms for similarly valued properties to see what else a buyer could get with the same money and adjust my valuation accordingly. My latest QV is double what it was the previous time around and this is without a valuer stepping foot on the property – and they are still miles from value. Having already taken a hit on my rates I’m in no hurry to encourage them back again.
Mackdunk,
this is the first market crash ive been through and Im loving it...
I take it that you are far more experienced and have seen them all by now...
what was it like for you in the 1929 market crash?
were your houses falling in value then?
or maybe you came in for the sweep a few years after to pick up the road kill...?
not such a bad day on the market...
:cool:
.^sc
Property investments are usually long term.
IF one was to do the numbers for a long term property investment, then one would use construction cost as the model. If you can buy a house for below construction cost, in the long run you will have done very well and bought yourself a cheap under valued asset. Buy and hold. In a few years you will be laughing all the way to the bank cashing in on your capital gains once the market stablised and starts to pick up again.
Thats fair enough Dr, but the stock market is long term also and is usually a leading indicator of economic recovery, thus the housing market still hasnt seen the bottom yet.
As MickMinus100 says houses can and most likely will drop below construction costs. Stocks do this too...they tend to 'overshoot' what they're really worth...
MacDunk when you say 'below construction costs,' are you incorporating land costs aswell? Things dont look rosy for sections. Also, what kind of houses do you mean? If its a 1970's house, sure it wont suffer from leaky building but it wont have modern fixtures, so you would expect to pay less than construction costs?