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Bubble, bubble, toil and trouble

Wednesday, March 26th 2008, 4:22PM 3 Comments

by Philip Macalister

Whenever there is a downturn in any market, whether it is shares or property, there are always one or two people who try to make a name for themselves by predicting all sorts of outlandish doom and gloom.

The latest is one crowd who is saying the housing bubble has been so big that it will take years and years to recover. Indeed, the suggestion is that prices will not rise back above their November 2007 peaks until 2018 at the earliest. The size of the bubble, they say, is so large it may take until 2028 before prices recover and people who invested in 2006 and early 2007 start seeing capital gains again.


While I am not an economist, claims like these seem ludicrous and designed more to create publicity than provide any meaningful insight into the market.

There are a hoard of well-qualified and experienced economists out there making their own predictions, and none I have seen bare any resemblance to the latest, unqualified, soothsayer.

What I have seen and heard is that there are lots of variables that drive the property market, and predicting some of them is very difficult.

For instance, immigration is a key driver of the market. While numbers are down at present, the government can quite easily turn on the tap that will provide a fillip to the market.

There are lots of other factors like the government making houses more affordable, buyers who have been priced out of the market sitting on the sideline and strong employment levels, which arguably provide a good backstop to the market.

There is no doubt the market is falling from its high growth rates of recent years, but that doesn't mean total darkness is descending on the housing sector.

I hear an increasing number of stories about landlords wanting to sell up and do something else with their money. That is normal behaviour. However, I am also hearing stories, and seeing people get quite excited, about the buying opportunities which are starting to emerge.
« Go Mr Common SenseThe housing market is over valued - so what? »

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Comments from our readers

On 27 March 2008 at 1:43 pm Pjonz said:
Who is this brilliant person who can forecast so far ahead?

I believe it will either be Keiran Trass, Ollie Newland or Martin Dunn.

These are the three that seem to have an issue with people making money out of property...

and what's more they all have an ulterior motive for saying what they said... one ulterior motive is called a newsletter/seminar, another is called a training weekend with a guru (very questionable) and yet another person creates so much fear that people sell their apartments regardless of how much they stand to lose to keep the third gentleman and his sales staff in a job.

You pick which one is which?
On 28 March 2008 at 9:21 pm Pete said:
I think the culprit (in this instance) was the manager / editor of interest who appeared on TV1 around 7:20ish one day last week. His name might be Bernard Hickey but I could be mistaken. I do recall yelling at the TV when he said with a straight face that it could take decades or more for house prices to recover to their current levels after dropping 30%.

The twit, he needs to enrol in economics 101 and be removed from public view for ... decades and decades until he is contrite and remorseful for being such a twat!
On 29 March 2008 at 7:54 am Scruffy Dude said:
I hope you guys are right because I just bought a house end of 2006!
Commenting is closed

 

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Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.15 ▼4.04 4.49
ANZ Special - 3.65 ▼3.54 3.99
ASB Bank 5.20 4.15 4.09 4.39
ASB Bank Special - 3.65 3.59 3.89
BNZ - Classic - 3.65 ▼3.49 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
Housing NZ Corp 5.19 ▼4.15 ▼4.09 ▼4.39
HSBC Premier 5.24 3.35 3.35 3.35
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.65 3.85 3.95 3.89
Kiwibank 5.80 4.30 4.34 4.74
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.55 3.59 3.99
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.69 4.79 -
Resimac 5.30 4.86 4.14 4.19
Lender Flt 1yr 2yr 3yr
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.69 3.69 ▼3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.65 3.59 3.99
The Co-operative Bank - Standard 5.15 4.15 4.09 4.49
TSB Bank 6.09 4.65 4.59 4.85
TSB Special 5.29 3.85 3.79 4.05
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.34 - - -
Westpac Special - 3.65 ▼3.54 3.99
Median 5.35 4.15 4.09 4.19

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