When the Auckland housing bubble bursts a lot of people are going to lose a lot of money. They won’t be able to say they weren’t warned. Just as a random recent sample:
17 April 2014 (international): 12 Reasons Why New Zealand’s Economic Bubble Will End In Disaster
March 18 2016 (also wins record for longest title): Yale econometrics professor tipped to win Nobel Prize writes paper saying Auckland housing market entered bubble territory in 2013; Previous Auckland bubble spread to rest of NZ and collapsed in mid-2007
13 June 2016: Auckland housing facing ‘violent end’ – expert
24 June 2016: Housing bubble about to pop, Bryan Gould predicts
20 July 2016: ANZ boss warns on property market
21 July 2016: Bank’s property warning reflects ‘complete crisis’
A couple of pieces over the weekend. The Herald on the madness of the current property market:
Houses traded like shares
The Weekend Herald‘s report yesterday on the frequent “flipping” of investment properties shows buyers are treating inhabitable houses like a stock or other valuable paper.
Between January last year and May this year, 1500 Auckland houses were bought and sold again. Nearly 100 were sold three times in those 17 months. Seven were sold four times and two five times in less than a year.
These houses are unlikely to be housing anybody. The buyers might not have even visited them since the purchase. They stand empty, sometimes in pristine renovated condition, while their value rises – by an average $1600 a day over those 17 months. Every time they sell, the seller books the capital gain as equity that can be used to buy another house, and the churn continues.
But sooner or later it will burst. Confidence can drop suddenly and unpredictably when nervous or smart money bails. Be ready.
And Interest on the broader picture:
The country is continuing to party like it’s 2008, with household debt growing at rates last seen just before the Global Financial Crisis.
The RBNZ’s monthly sector credit figures show that housing borrowing hit an annual growth rate of 8.8% in June, while total household claims (also including consumer finance) had an annual increase of 8.3%. Both these rates of annual growth are the fastest recorded since May 2008.
Housing debt alone lifted to $221.42 billion in June from $219.563 billion in May.
The housing debt has mushroomed by nearly $18 billion in the past year. That’s an average growth rate of about $1.5 billion a month – though it’s actually been running considerably stronger than that in recent months.
And new monthly data now being released by the RBNZ show that around 40% of new mortgage borrowing is on an interest-only basis, with about 55% of money being borrowed by investors on interest-only. …
Tick tock. Nats will be hoping it holds off until after the election.