Housing bust could be looming
Tue, 10 Jul 2012 6:07p.m.
By Tom McRae
If you're looking to sell your house, now could be a good time.
A shortage of quality housing has pushed up prices to a record high across the country.
But one property commentator is warning that an even bigger bust than the last one could be looming on the horizon.
Space is at a premium at open homes these days.
Such is the demand for houses, and many are going for well over their capital value.
So is this a property bubble?
“It's not a major bubble – nothing like the one that we had five years ago,” says property commentator Olly Newland. “But there are stirrings. There are froths. There are small bubbles.”
A veteran property commentator and investor, Mr Newland says if those bubbles pop, the bust will be bigger than the last.
“It will be a very messy bust, I'm afraid. It will look like the last bust was nothing. It would be very dangerous and I’d certainly be getting out of the way.”
But right now properties around the country are being snapped up at a record rate and at record prices.
The median house price is now $372,000, which is up 3.3 percent from this time last year. The number of houses sold has also increased, up 17 percent.
“It's in context of the slow but steady increase we've been seeing in prices over the past 12 months,” says Helen O’Sullivan of the Real Estate Institute of the New Zealand.
That fact leads many real estate agents to doubt any sort of bubble.
“I just think we've got a bit of a catch up,” says real estate agent Anne Duncan. “We had people sitting on the fence for a fair while, and now they've decided the world's not going to end tomorrow we'll get on and buy.”
Canterbury has seen the biggest jump in the number of sales – 56 percent more than this time last year, mostly in the surrounding suburbs of Christchurch.
Central Otago recorded the highest increase in prices, up 11.5 percent.
And Auckland’s median house price is the highest, at half a million dollars.
An economist says record low interest rates are enticing people into the market, but warns buyers need to be careful.
“They may be able to service the mortgage now, but in two years time it's potentially a different story when those mortgage rates rise,” says economist Gareth Kiernan.
While things are looking good if you're selling, the Homeowners and Buyers Association is warning buyers to be cautious not to get caught up in the current surge and over-extend themselves.
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12/07/2012 11:16:36 p.m.
The government view is to much borrowing by kiwis being put into the property sector.
So where is the governments effective policy to curb such borrowing for all but 1st home buyers?
Wouldn't such a policy put some control on house prices?
like most policies this government has they don't have one.
12/07/2012 11:48:27 a.m.
Well this is a surprise. For the first time since maybe ever - Ollie Newland is speaking about the possibility of another bust. Generally he is all about talking the market up. I honestly believe that the worst possible scenario for the real estate market is too much unsubstantiated comment being produced for the public. All real estate markets are "micro" so the facts that drive the prices are locallised and yet all our reports are Auckland & Canterbury driven. So the media runs the risk of sending out dangerous signals to other areas. If you want some genuine advise talk to a real estate agent THAT only your best friend and your Mother & Father would recomend.
10/07/2012 8:25:07 p.m.
Jeff Cate wrote:
Commentators should look into the micro markets that exist in the Auckland Property Market. The market is price range specific, construction critical, education driven and suburb selective. If you have a property that includes all the best factors for these 5 criteria, then you will be well surprised with you selling price. On the other hand if you lack most of these criteria then your market is just normal so don't get to excited. The central Auckland market has been condensed from the bottom up and the top down, if you are in the upper price range you are in for a long wait. The Auckland house price average is currently a bit deceptive as the lack of recent high price sales above $2m is portraying only fractional increase but don't tell that to the buyers in the $600k to $1.4m range. Central Auckland suburbs all seriously lacking quality homes for sale so the market is not in any kind of a bubble. Over the last 33years I have never see so few quality listing available.
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