Why are Aucklanders obsessed with real estate?

The property market in NZ is seems to be holding quite well in comparison to other countries. As an example if you look at the Spanish market prices have dropped between 25%-50% depending on location. One of the largest developments of new homes (Polaris World Torre) has outstanding developments located next to incredible golf courses and all amenities. However, prices are keener now than ever. You can see for yourself at www.cain-grey.com. Good luck. <a title="Polaris World Torre" href="www.Cain-Grey.com"> Polaris World Torre</a>

Steve, are you seriously trying to say if investors did not invest in property house prices would remain static? Secondly, for those that choose to rent [ for whatever reason ] where would they live? Your last question, KiwiSaver

Brian, what is wrong with someone investing in property for their retirement?
What is wrong is that the poor person who has to pay the "INFLATED PRICE" for the property when the investor decides to sell it. Think about them, they will have to spend a hell of a lot more years paying that house off than the investor would have, and think about when they retire, they would have only just payed the morgage off to fund the investors retirement,
So how on earth are they going to fund their retirement?
You see you didn't think of that did you.

There is nothing wrong with property as an investment. In fact as an investment vehicle it has performed well in NZ thanks to generous tax treatment which has allowed investors to gain a tax shelter through LAQCs. Can I ask though why fixed interest investors should have to pay tax at marginal tax rates on their interest yet property investors should be able to claim back losses against personal tax.

This has created a distortion in the market which has helped drive property prices as investors have leveraged as much as possible to bid up prices. Current average yields are hovering between 4.5% and 5.5% depending on which city you look at. Will investors be willing to purchase properties if they had to fund their losses out of the own pocket when interest rates return to historical norms? Only if they believe prices will go up for extended periods of times.

Back to the affordability question. Auckland median house price = approx $550k. Median household income (pretax) = approx $60k. Historical interst rates approx 8%. Deposit / equity 20%. Loan = $440. Interest = 35k pa before principal. Explain to me again how prices have scope to keep on going up unless wages grow massively.

Guys, tell me what is wrong with someone investing in a property for retirement, they want an income producing asset, they [ borrow ] the money, the tenants help pay down the mortgage, the investor meets the short fall, is that not savings? I mostly encourage people to invest in the best of the lower end of the market. Please don’t try and tell me that market hasn’t increased in value over the past few months and my apology to Dr Brash.

And why would an increase in interest rates not be helpful? Helpful to who? Those who have overextended themselves by buying overpriced property. Or helpful to savers who are the people who provide the scant capital that property investors leverage up to buy these propertys.

The reserve bank has changed the ratio for banks that they must source funding so more must be sourced locally. These savers need an incentive to lend their money to banks.

BTW Dr Brash is no longer reserve bank governer - he stepped down from that post many years ago - so I think we are safe from him putting up interest rates.

Why does our mainstream media publish this type of this unbalanced article / opinion. (Apart from the obvious advertising revenues that the real estate industry bring).

I agree with Michael, this article is a load of rubbish the Tauranga market, for example, has not 'stepped up to the plate' and apart from the absolute bottom end, has been steadily falling for two years. This is just property speculator hype trying to rope suckers into fuelling a false recovery - those interest rates WILL go up.

I would expect nothing else from an estate agent and investor in property. Similar from bank economists. You don't have a vested interest do you? I don't think I have ever read a balanced argument from real estate industry insiders.

A balanced article might include analysis on the following fundamental factors:

* why NZ has managed to avoid a proprty slump when the rest of the western world (barring Austrlia) has had 10-50% falls.
* rental yields at historic lows
* interest rates set to go up from record lows making yields even worse
* rents static to falling in many locations
* unemployment still set to increase through 2010 casing more mortage stress on heavily debted households.
* record price affordability on the basis of household incomes (this one is always glossed over by property spruikers who seem to assume that incomes are elastic - just send the kids out to work)
* some analysis of the supply / demand of the market and how price affects demand. All we hear is that supply is tight so we better buy now before we miss out.
* the likelihood of ring fencing of property losses through LAQCs and how that might affect heavily indebted investors.

When discussing property prices in such articles I would have greater respect for the author who is involved in the industry if he would acknowledge some of these factors instead of the constant cheerleading we here which is designed to appeal to those afraid on missing out.