quote:
Originally posted by Steve
This analysis shows the difference from the point of view of an investor vs home-owner.
Also a good statistic with regard to the branch of this thread that got into shares vs property etc
Housing overvalued by 32%, says analyst
Griffiths’ model valuing the median New Zealand house since 2003 shows the actual price is a close fit with the discounted cashflow value to a property investor using 95% gearing, and mortgage interest payments as a tax shield on income.
But from the perspective of an owner occupier, who receives neither rent nor tax breaks, prices began to outstrip value in 2003. Griffiths ’ model puts the current gap at 32%.
That level of overvaluation is supported by various affordability ratios, such as rental yield and the ratio of price to household disposable income.
Even for an investor using 95% gearing, prices are at a level that has become difficult to justify.
Griffiths also argues housing hasn’t provided returns as high as those from New Zealand or US equities, over time.
A $100 investment in US equities in 1960 would now be worth $1020; in New Zealand equities, $951; and in the New Zealand house market, $635.