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PROPERTY BOOM IN THAILAND SLOWED

NZ house prices are the opposite of Thailand. Prices rose by 11.36% in 2007, significantly up from 9.55% in 2006. This is despite the fact that the Reserve Bank of New Zealand (RBNZ) has increased interest rates since early 2004 to cool down the housing market. Higher interest rates and an overheating market were the main causes of the slowdown. However it has not stopped the immigration poicy and these are the main top end buyers

WHY IT COULD NOT LAST


The Kiwi housing boom is unsustainable because salaries were not increasing sufficiently to match these home prices. Homes are not a magical source of unending wealth, they are simply a place to live and people must be able to afford them on the basis of their salary. People were putting 0$$$$$ down and merely telling brokers how much they make with no proof or appraising their houses higher to get a better loan (paper money). If you walked into a now defunct finance loan office and scribbled on a piece of paper, that was good enough to secure a loan????? So people speculated and went absolutely nuts which then raised the prices of homes, thereby preventing real buyers from affording their first homes. The home price/median income ratio is 3:1. Change this and all hell breaks loose for those householders who have budgeted to pay back their mortgages as in the case in NZ now. Salaries are not in line with the home price/median income rate is 3:1.

PROPERTY DISASTER IN NZ LOOMING

As the USA & UK tumble so will NZ. Heres how it will start. The first to go are the Finance companies who lend money as these individuals are not banks but money lenders and this has already started. To combat this theres the realty that Banks will start to offer 45 and 50 year mortgage loans (which spells disaster to borrowers as this indebts their children). This has now started as with the combined mortgage allowing up to 6 friends to borrow for 1 house??? building a bigger hole for borrowers & arguments for the friend policy. The next to go will be the realty companies and those associated with selling and brokering these properties. Once they go so will the construction jobs; cabinet and kitchen joiners, gib stoppers, builders and the plumbing and electrical workers all related to the building industry. This then affects the wholesalers and suppliers in the building industry so they too will lose workers because of the situation and then what starts next are the foreclosures and bankruptcies just like in 87 –89 in NZ but this time it will be bigger. We will then get unemployment, salary and wage cuts, and chaos as the price of your $500,000 house will now sink and we are heading into a depression mode or as we would call it back to normal prices as they should really be. This will cause the $$$ to drop and then chaos will occur.  Think about it, think about the 87 crash and there you have it as we have not learn’t any lessons by what we did back then. It may take time but it will happen.


PRESENT HOUSING DELEMNA IN NZ OCTOBER

2007 FOR KIWIS. In 2010 nothing was learnt and houses are now back to high prices as with goods and services
The Hamer family faced the collapse of their dream. They bought their first home in Wellington in 1987, the day the share market crashed, and it did not get much better for Maria and Tim.  Mortgage interest rates went through the roof, they then sold in a slump and moved to Auckland but their cash did not come within reach of buying a home. Now they have joined the growing ranks of Kiwis who cannot afford to buy, and are being forced to rent instead. "I hate it, I would much rather be in our own home," Maria says. TV property guru Olly Newland sells in booms and buys when prices drop.  He says he has not seen a situation in the property market like now and is expecting tough times ahead. "I have sold down and paid off debt, and that's probably a wise thing to do," he said..
House prices have been rising for 50 years with a few booms and busts along the way but in the past five years incomes are lagging  way behind. Now pundits predict only five out of 10 Kiwis will own their own homes in 10 years time, and since that is the only way most of us save, the future looks bleak. "An average first home buyer can probably not service much more than $250,000 of debt.  [In Auckland] you will either buy a suicide box in a high rise apartment or a leaky building in the suburbs, or you can live on a subdivided site in Manurewa," he says. According to one international housing survey it never used to be this way.  For generations Kiwis bought the family home for around three times their household income, which is the affordability standard still recognised globally.
In the early 1970s he was able to buy a bungalow in inner city Auckland for $22,000, while earning $7,500 - which is the 3 to 1 ratio. That same house would now be worth between $500,000 and $600,000.To buy that today, you would need to be earning $170,000. It was not until the 1990s that house prices exploded and people began to shell out many times their household income for a house.  The worst hit area was Auckland."It's quite concerning for us, although we know we really want to get into a house," Tim Hamer says.He and his wife were badly burnt by soaring mortgage interest rates in the property boom of the 1980s and now they are gun-shy.
"We still want to be able to spend money on the kids camps, or if they want to do their sport  and not stress out," Maria says.They are looking for a house in Te Atatu for around $340,000, which is about three times their joint income."We've been doing some serious looking. More than the average person," Tim says."If they do it'll be a bargain."A bargain is what they are looking for as the Hamers fear too much debt."Spend less, save more and have a plan to kill the debt quickly,"

Things have got so tight for home buyers that banks are for the first time considering 50 year mortgages, which means debt to the grave and maybe beyond.  It is now not inconceivable our children could inherit the mortgage."No 50 year mortgages.  Even when you sign up for a 30-40 year mortgage you should look at it and say I think I can kill this in 15.  Because if they're 30 they know they will by the time their kids are facing tertiary education, be debt free.  So then you say how do I improve my income?  Should I get a second job.  Should I take in flatmates."  If you are prepared to take short term pain, home ownership is a good option for your future under any scenario.

100% MORTGAGES

These will spell disaster as incomes will drop & the buyers will not be able to cover their payments. NZ is already offering this as is Australia & USA. They will owe more to the bank than what the house is worth. 40% of new buyers in NZ are opting for 100% mortgages. Totally crazy & lenders of course are encouraging it. ASB International banking Subsidiary BankDirect allows up to 6 people to buy 1 house. TSB Bank is offering 40 years mortgages which will mean higher interest rates to look forward to during this period & maybe a crash. The standard 20% deposit is gone as noone has the savings apart from the wealthier class. 100% mortgages started in 2006 and NZs mortgage market is worth $148 billion & approx 40$ matures each year & must be refixed. Some brokers offer 102% loans covering the fees as well. Paying 100% is crazy & all one is doing is paying money to a different landlord. Paying it off quick may be hard especially as the future looks a little dim and the salary scale may slide. There will be a lot of foreclosures in the future years as the slide has started. If 100% mortgages happen in Thailand then the housing situation here will be in a crises. At present the Thai population has been subjected to all sorts of handouts especially from the Taksin ex Govt so their borrowing ability is high due to credit cards, no deposit on cars etc & low interest rates. Change this then you change the whole ball game.

   

THOSE PEOPLE NOT AFFECTED

Take the Lim family who decided China was too polluted, overcrowded and not for them. Educated and having adequate savings they saw NZ as a squeaky clean country that is a safe haven for their children and is clean with no pollution and one can drink the water out of the tap. They qualified to enter and become NZ citizens and thus brought their life savings and skills to NZ. They can buy what they like when they like, how they like and as citizens can get social benefits whatever that means. With the younger folk in NZ leaving in droves theres a need for skilled overseas workers. Hence the Lims fitted the bill and here they are. They see NZ as a gem and with adequate cash savings they can well afford to buy a nice suburban property in inner Auckland for $750,000 cash, yes cash. No worries, no mortgages debt free and they have money and a head start to get on with life.

Then we have the Wilkinson family from the ratrace of the USA who saw George Bush as bringing the USA to an undesirable level of chaos and debt all in the name of oil. Not only did they see the immigration policies going haywire but also the Iraq war cost and the never ending property boom by idiots trying to outdo thir neighbours. Yes that familiar scenario appeared. Americans are not safe at home and the terrorism stigma is now in everyday life in the USA with a debt beyond imagination. Heck with this they said and as an electrical technician and the wife a doctor it was easy to switch to the transition of living in the down under country of NZ. They had the funds, they passed the scrutiny program and they wanted to live in a place that was safe and far away from the Political war zones of Iraq & turmoil being created back home. They too had had enough and so they bought their treasure chest and came to NZ to live. Buying a house with cash was no problem for them either --no loans, paid cash and have plenty left to get on with life.

With Somchai and Nong and their 3 children who needed a better grasp of the education system in NZ for thwir children in life it was a good way of leaving steamey Bangkok and coming to live in NZ. It was easy to pass the necessary requirements and they liked Christchurch so with them and their children they bought money to buy a business, house and educate their children far better than they could in Thailand. They can go back to Thailand in the winter time to run their other business and avoid the crazy weather patterns and have the best of both worlds but they can buy what they like, when they like in NZ which is exactly what they have done.

Now get the picture: with a vaccuum needed to be filled NZ and others require immigrants and this is where the cookie crumbles. The property boom just stays the same but the poor old kiwi is going to struggle even more. As we have said a house is now far beyond their wildest dreams as more immigrants will take over, hike the prices as they still think its cheap and then everything will continue to rise --- or will it???. In the USA its already a problem

PROPERTY REPORT THAILAND RULES

Take THAILAND yes "the land of smiles" well they have kept foreigners at bay and told them sorry you can't buy property here as we have too many people to look after. It has worked for the Thais. Properties are in line with salaries using the 3:1 median ratio and they are not affected by whats happened around the world like the UK, USA and Australia & NZ. Speculators must follow set guidelines and foreigners cannot own houses in their name. They must lease them off Thais again preventing speculation from foreigners. Land is also not affected as foreigners must invest over 40m baht to qualify to buy only 1rai which is only 1/2 an acre. They are not allowed to buy any more land so this stems the flow of foreign ownership where NZ & the rest it is the opposite as they have sold off all their land to overseas interests. Thailand has used its knowledge and watched other countries but has not followd in the same foot steps. Ok Bangkok has a mountain of unfinished condo complexes but its still easy to buy a nice apartment that one can afford and Bangkok has the advantage that the unfinished project will be bought up by investors to finish as it is a hub. At the moment a lot of interest from buyers in China and surrounding countries to have a condo in Bangkok. Gone in the West are these days so one must take their hats off to the Thais who have used common sense to look after their people. In the west it is too far to late and their is no reverse so this makes Thailand an even more attractive place to live without obsorbing higher commodity prices and services that west now has to contend with..

 

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