Core Logic sees up to 500 first home buyers may be in negative equity in areas with 20% falls, but they're fine if they don't have to sell; All but a few hairs of NZ Inc's head is well above water
Firstly, I think your hair looks great - I couldn't put my finger on what looked different with you this morning.
Secondly, not sure if it is something of interest to you, but would be interested in your thoughts on exploring the impacts of public service pay freezes? I ask because I see reference to incomes increasingly over the past year for those who are more likely own a home. However, many in the public service are being given 1-2 percent pay rises if they are lucky (e.g. a pre-pay-freeze collective employment agreement guaranteed an annual, albeit very small, salary increase). As collective agreements expire, increasingly the only way to get a pay rise in the public service is to leave, or migrate to another agency. Migration to another agency, or leaving the public service altogether, can cause a significant loss of subject matter expertise.
Anyway, not sure if there was a question in there, but I am increasingly envious of those in the private sector getting some huge pay rises (mostly to suck - up inflation).
I was wondering if the public sector pay freeze is the reason for Wellington house prices falling further and faster. The govt needs to change this quick before it they lose their capability to the private sector. There is still so much important work to be done!
the income package in the public sector should be a maximum of 10 times the gross median income. ie about $340,000 per annum. (based on real IRD data, not Stats bs)
I’m in the category of potentially owing more than I own if the market falls 20% where I am. And as long as I keep my job I’m not worried at all. I bought a home so I didn’t have to rent.
For years we have decried the rising cost of home ownership. Prices are finally falling, but not to any great level. Negative equity is a concern but to a teeny tiny segment of the market - Are homeowners really spooked or is it simply the leveraged investors trying to masquerade as a homeowner to push their tiresome narrative?
I think it's the later. We'd like to think all first home buyers could afford buying a McMansion on minimum wage jobs but the reality is those who could buy at these crazy high prices are either FHB with high paying jobs or "investors" who then cry how rent doesn't cover the costs.
Banks have also got significant provisions to cover potential losses on their housing loan portfolios, but is other types of lending where losses are more likely (but again, they are generally quite well covered). I don't expect any problems for the banking sector from house price declines.
20% price drop isn't enough to get us back to pre covid prices. And even then it was already over inflated.
It's fascinating to see how people are willing to make the banks rich and themselves poor just so they can see the value of their asset going up and pretend they are actually rich.
I must be learning things here Bernard, I called out a dividend from the 51% Govt owned power companies to taxpayers/customers in a conversation yesterday
Thank you for championing this issue...again. Your analysis is spot on. Having lived in NZ for over 19 years and orginally from the UK via Singapore, NZ houses are anything but affordable for those on median wages. Treating housing as a specualtive asset is one of the major issues facing NZ (as well as no compulsory third part car insurance but do not get me started on that.) What if we treated other basic necessities of life as specualtive assets. As an economics teacher. I explain the differences between wants and needs. Housing has to be the latter but it has become the former.
Hi, as you say the media may be overplaying the 20% drop, but you are certainly underplaying it. Not sure why you have so much analysis of our likelihood of dying when the single biggest reason for needing to sell up is ignored: a job change. If you're holding onto your house in Lower Hutt because you bought at 850 and it's worth 680, that's a stressful and difficult situation to be in. If you're willing to wipe out your deposit, the bank doesn't care, they're whole. And you have a hole where you thought you had equity. Or you become an involuntary landlord and people will now consider you an investor, and won't like it if you complain your rent doesn't cover your costs!
There was also an indication that we may be moving into a housing glut in some main centers (Christchurch in particular). I recall this was also an influence in holding property prices down, post GFC. Is this factored into any/all predictions on our current anticipated correction?
Interested in why capital ratios (whether T1 or total) have recently dropped a not insignificant amount from their peak ahead of the eventual requirements RBNZ will bring it. I suppose it could be that wee period over first half of 2022 where credit supply was tightened? And the slight release since CCCFA changes again.
Also interesting is that the gap between 1/2 year mortgage rates and the averaged weighted servicing rate closed in quite significantly in late 2021 early 2022 to have what looks like the smallest gap for upward pressure on rates there has been in quite some time.
I'm no where near as informed or clever as Bernard but I'd make a guess the capital ratio drop is when Adrian told the banks they could start paying dividends again.
Glad to see those rational data-based comments from you Bernard on how many might lose their house. I hope it helps dial back the tendency for the uninformed to extrapolate incorrectly from a reasonable statement about 500 from CoreLogic, made for an entirely different reason to 'losing one's home'. I am nervous about your argument for next year - I have a suspicion that we all need to start to give an increasing supply of housing some weight in the argument, but I am not able to take a punt on that.
Interesting that you think the social license handed to private banks and paid for and enabled by money conjured up by both they and the reserve bank owned by NZers then charged for both via Govt debt to be repaid by taxpayers and by those same citizens for their housing mortgages at a significant and variable cost and basically run like a game of Monopoly is still acceptable given the inherent power used and somewhat random rules imposed without consultation or consent of the citizens it serves.
Also in terms of divorce or death these too are not the big deals as they aren’t really relevant to individual or collective property rights in the same way anymore.
Since 1976 the Property Relationship Act provides for both parties and seperate types of contributions to relationship (or even multiple relationships).
The Act of 1992 for the support of children obviously including housing and other plus carer needs is also relevant and longstanding.
Clearly access to justice in these regards is a human and legal right of all most especially vulnerable women and young children given the nature of our State institutions and vile abuse in the same being perpetuated by as yet largely uncharged perpetrators who are in fact criminals within a complicit state apparatus.
Most people do not get “married” in a conventional sense and in law remain still responsible for the provisions for their families and most particularly children while generally Mothers remain the most needed and unpaid carers of them.
So the problems caused by holding onto orthodoxies that are neither legal nor human rights nor having social license and moral authority means this type of behaviour and thinking is both oppressive and well past their use by date.
The system requires a radical reform in order to be lawful, rights based and ensure the needs of all are taken into account by leaders equitably to enhance progress and social cohesion, without distraction, in my view.
What about investors who are a large proportion of the market? They have jumped in massively and are now facing increasing costs and decreasing revenue (rent). A good example is a townhouse development in Petone, where Mum and Dad investors brought in off the plans and are now selling at a loss - and they have had to sell!
Hi Bernard
Firstly, I think your hair looks great - I couldn't put my finger on what looked different with you this morning.
Secondly, not sure if it is something of interest to you, but would be interested in your thoughts on exploring the impacts of public service pay freezes? I ask because I see reference to incomes increasingly over the past year for those who are more likely own a home. However, many in the public service are being given 1-2 percent pay rises if they are lucky (e.g. a pre-pay-freeze collective employment agreement guaranteed an annual, albeit very small, salary increase). As collective agreements expire, increasingly the only way to get a pay rise in the public service is to leave, or migrate to another agency. Migration to another agency, or leaving the public service altogether, can cause a significant loss of subject matter expertise.
Anyway, not sure if there was a question in there, but I am increasingly envious of those in the private sector getting some huge pay rises (mostly to suck - up inflation).
I was wondering if the public sector pay freeze is the reason for Wellington house prices falling further and faster. The govt needs to change this quick before it they lose their capability to the private sector. There is still so much important work to be done!
the income package in the public sector should be a maximum of 10 times the gross median income. ie about $340,000 per annum. (based on real IRD data, not Stats bs)
beware of that heinous terrible evil, GREED!!!
I’m in the category of potentially owing more than I own if the market falls 20% where I am. And as long as I keep my job I’m not worried at all. I bought a home so I didn’t have to rent.
Bernard, re the haircut thing, don't worry about it. We love you just the way you are!
Sorry, I saw an under 30 price somewhere - does anyone know how I can get that for when my subscription renews?
When it's up for renewal, you can unsubscribe from your current deal and use this: https://thekaka.substack.com/subscribe?coupon=953f1dd1 :-)
Thanks!
For years we have decried the rising cost of home ownership. Prices are finally falling, but not to any great level. Negative equity is a concern but to a teeny tiny segment of the market - Are homeowners really spooked or is it simply the leveraged investors trying to masquerade as a homeowner to push their tiresome narrative?
I think it's the later. We'd like to think all first home buyers could afford buying a McMansion on minimum wage jobs but the reality is those who could buy at these crazy high prices are either FHB with high paying jobs or "investors" who then cry how rent doesn't cover the costs.
Banks have also got significant provisions to cover potential losses on their housing loan portfolios, but is other types of lending where losses are more likely (but again, they are generally quite well covered). I don't expect any problems for the banking sector from house price declines.
20% price drop isn't enough to get us back to pre covid prices. And even then it was already over inflated.
It's fascinating to see how people are willing to make the banks rich and themselves poor just so they can see the value of their asset going up and pretend they are actually rich.
I must be learning things here Bernard, I called out a dividend from the 51% Govt owned power companies to taxpayers/customers in a conversation yesterday
Will be interesting to see who shareholders are and what they get from our taxpayer paid infrastructure . Which we are then charged again for 😂
Thank you for championing this issue...again. Your analysis is spot on. Having lived in NZ for over 19 years and orginally from the UK via Singapore, NZ houses are anything but affordable for those on median wages. Treating housing as a specualtive asset is one of the major issues facing NZ (as well as no compulsory third part car insurance but do not get me started on that.) What if we treated other basic necessities of life as specualtive assets. As an economics teacher. I explain the differences between wants and needs. Housing has to be the latter but it has become the former.
Hi, as you say the media may be overplaying the 20% drop, but you are certainly underplaying it. Not sure why you have so much analysis of our likelihood of dying when the single biggest reason for needing to sell up is ignored: a job change. If you're holding onto your house in Lower Hutt because you bought at 850 and it's worth 680, that's a stressful and difficult situation to be in. If you're willing to wipe out your deposit, the bank doesn't care, they're whole. And you have a hole where you thought you had equity. Or you become an involuntary landlord and people will now consider you an investor, and won't like it if you complain your rent doesn't cover your costs!
Keep the hair!
Hi Bernard
There was also an indication that we may be moving into a housing glut in some main centers (Christchurch in particular). I recall this was also an influence in holding property prices down, post GFC. Is this factored into any/all predictions on our current anticipated correction?
Interested in why capital ratios (whether T1 or total) have recently dropped a not insignificant amount from their peak ahead of the eventual requirements RBNZ will bring it. I suppose it could be that wee period over first half of 2022 where credit supply was tightened? And the slight release since CCCFA changes again.
Also interesting is that the gap between 1/2 year mortgage rates and the averaged weighted servicing rate closed in quite significantly in late 2021 early 2022 to have what looks like the smallest gap for upward pressure on rates there has been in quite some time.
Thanks Bernard for an intriguing read as always
Hi William
I'm no where near as informed or clever as Bernard but I'd make a guess the capital ratio drop is when Adrian told the banks they could start paying dividends again.
Glad to see those rational data-based comments from you Bernard on how many might lose their house. I hope it helps dial back the tendency for the uninformed to extrapolate incorrectly from a reasonable statement about 500 from CoreLogic, made for an entirely different reason to 'losing one's home'. I am nervous about your argument for next year - I have a suspicion that we all need to start to give an increasing supply of housing some weight in the argument, but I am not able to take a punt on that.
cheers
Clive
Interesting that you think the social license handed to private banks and paid for and enabled by money conjured up by both they and the reserve bank owned by NZers then charged for both via Govt debt to be repaid by taxpayers and by those same citizens for their housing mortgages at a significant and variable cost and basically run like a game of Monopoly is still acceptable given the inherent power used and somewhat random rules imposed without consultation or consent of the citizens it serves.
Also in terms of divorce or death these too are not the big deals as they aren’t really relevant to individual or collective property rights in the same way anymore.
Since 1976 the Property Relationship Act provides for both parties and seperate types of contributions to relationship (or even multiple relationships).
The Act of 1992 for the support of children obviously including housing and other plus carer needs is also relevant and longstanding.
Clearly access to justice in these regards is a human and legal right of all most especially vulnerable women and young children given the nature of our State institutions and vile abuse in the same being perpetuated by as yet largely uncharged perpetrators who are in fact criminals within a complicit state apparatus.
Most people do not get “married” in a conventional sense and in law remain still responsible for the provisions for their families and most particularly children while generally Mothers remain the most needed and unpaid carers of them.
So the problems caused by holding onto orthodoxies that are neither legal nor human rights nor having social license and moral authority means this type of behaviour and thinking is both oppressive and well past their use by date.
The system requires a radical reform in order to be lawful, rights based and ensure the needs of all are taken into account by leaders equitably to enhance progress and social cohesion, without distraction, in my view.
What about investors who are a large proportion of the market? They have jumped in massively and are now facing increasing costs and decreasing revenue (rent). A good example is a townhouse development in Petone, where Mum and Dad investors brought in off the plans and are now selling at a loss - and they have had to sell!