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 CANNOT 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
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.