Property boom on horizon - expert
Tue, 10 Jul 2012 7:29a.m.
By Susie Nordqvist
A leading property commentator says another property boom is on the horizon and next time the bust could be bigger than the last.
The warning comes as new figures out today show property prices increasing once again.
“It is not a major bubble, nothing like the one that we had five years ago. But there are stirrings, there are froths, there are small bubbles,” says property investor Olly Newland
Mr Newland sees some signs of a bubble in the inner city suburbs, where prices have jumped by up to 40 percent in some cases.
He 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,” he says.
But many estate agents aren't convinced.
“I personally don't think there's a bubble going on. I just think we've got a bit of a catch up. 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,” says Anne Duncan of Anne Duncan Real Estate.
She admits affordability may become an issue for some.
Economist Gareth Kiernan says our housing market is overvalued, which should reduce the risk of another bubble.
He says even with record low interest rates, people are still wary of taking on too much debt.
“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 Mr Kiernan.
Newland says hiking interest rates won't prevent another bubble, but freeing up more land for new housing might.
But all of this is little comfort to Auckland property buyers with the median house price in our largest city now $500,000.
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10/07/2012 5:34:03 p.m.
I'm sitting on my hands now waiting for interest rates to rise in a couple of years. People buying today will struggle with a couple of percentage points rise in interest rates. Investment returns in Auckland are pathetic, so it's only owner-occupiers paying far too much for cold damp boxes in Auckland. Unfortunately those home loan repayments have to come out of the family budget. Once interest rates rise, they will struggle. At present it is less risky to sit on your money and rent a property in Auckland. You can also rent something much nicer than you could afford to buy. It's a no-brainer.
10/07/2012 3:59:46 p.m.
If prices are up a lot, why is the GV rates so small.
10/07/2012 1:16:36 p.m.
Yeah but in Tauranga the union workers actually work vs go on strike for socailble hours. Ports of Auckalnd vs Tauranga illustrates that well.Is a world of difference.The rise in prices is reflective of a housing shortage. 2 places in the country with a housing shortage pushing prices up a lot, Auckland due to the RMA, and Christchurch due to the quake.Elsewhere we haven't really had a house bubble burst in that prices have hardly lowered anywhere, but the number of homes selling has dropped considerbly so real estate agents have definately felt the recession.Surely Gareth has studied economics, like Supply and Demand? The RMA has squeezed new development causing a shortage - so what happens to the price when supply is squeezed? Thats like high school economics, let alone tertiary education! Its not that the housing is over valued, thats the current value due to the housing shortage.If not like the house prices, can always live elsewhere. Nobody is forcing everyone to live in Auckland.
10/07/2012 9:30:56 a.m.
tauranga is in another world compared to Auckland. You can still by a section for $110K and a house for less than $200K. In my industry we havn't even recovered from the bust of 4 years ago, so please don't try inflict more pain on us you greedy Aucklanders.
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