Suddenly now is the time to buy property
Friday, February 27th 2009, 3:40PM 
9 Comments
They say a week is a long time in politics, but clearly the same can be said for the property market. On Sunday one of the papers had another doom and gloom story with one of the most stupid suggestions imaginable.
If you’re selling your house, drop the price 20% and you will get a flood of buyers. Yeah – no doubt you will, but why give away 20% of its value? If it’s priced appropriately you don’t need to.
Next it went on to extol the virtues of tenders as the buyer has to nominate a price.
Well, tenders and auctions are fine. My experience here is that the theory is great but the reality is that it doesn’t work. Having watched quite a few auctions in recent months it is clear bugger-all is sold under the hammer. The most likely to sell are mortgagee properties as the bank just wants whatever money it can get.
Tenders are an alternative. Again it seems to me potential buyers just don’t like this method of selling. Unless they absolutely fall in love with a place and are prepared to pay a silly price then the likelihood of selling this way is low.
My take on the market at the moment is that if you want to sell a property, put a price on it. The market is far too skittish at the moment and vendors are too uncertain on what the value of a property is to make up prices themselves.
The other piece in the papers which caught my attention was the lead story in the Herald: Now’s the time to buy a house.
I loved it, not just because it echoed what I have been saying, but because it is right. If you have some money and are happy to invest in property, rather than shares, corporate bonds, bank deposits or something else, then consider property.
The market is near the bottom, money doesn’t get much cheaper than this, and over time prices will recover.
I’ll be watching this weekend’s media to see if they all get on the bandwagon and start preaching now is the time to buy.
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On 27 February 2009 at 5:24 pm Alistair said:
I agree its a good time to buy especially with the low and soon to be a bit lower interest rates for 5 @ 7 years fixed. They will probably drift up before prices do.Also there are smaller property cycles and areas within the big picture that may have elready bottomed out. Also, there is going to be a shortage of property shortly with the lack of building consents being issued lately and a few expats heading home after losing jobs overseas-I know of two already. On 27 February 2009 at 11:29 pm JMPHL said:
I think people should be very confident that their job is secure (even if the property is cashflow neutral). I live in London and every day there is news of more redundancies. It is hitting many sectors - obviously the financial sector, but also professional services, retail, hospitality. Among my group of friends, all highly skilled professionals, a number have been made redundant through restructurings and I fear that this is just the beginning. As they are also all ex-pats, I wonder whether they will return to NZ if things stay bad here, but moreover, is this trend going to strike NZ in the next 12 months. Unless you are in a strong position with pleanty of capital and strong cashflow, I would wait and see what the economy does in case this worldwide economic crisis really is different from the others. On 2 March 2009 at 3:30 pm Browny said:
Sounds like real estate agent speak 'now is the time to buy' & 'the market is at the bottom'. No-one can 100% guarantee we are at the bottom of the cycle yet and although I am actively in the market to buy more properties I am not purchasing at the listed 'retail' price. Bargain hard but also in the knowledge that we may not yet be at the bottom of the cycle On 2 March 2009 at 3:37 pm Jeremy said:
I think it is a very good time to buy. Although any time from now till early next spring will be good too. After that it should all be go with mild to moderate price increases. Quite a few people I know hope to pick up a renter pretty soon - and I will too. Very tempting with interest rates so low. I am enjoying my mortgage payments which have dropped 34% since november last year. Only trouble is I am not negatively geared much anymore! Damn. On 2 March 2009 at 5:17 pm Tony said:
A number of fair points made regarding whether is a good time or not to buy. Think the following needs careful consideration-
- the NZ cycle is about 6 months behind the UK- things are bad there and getting worse and we have not felt much of the fall out from there (as yet).
- interest rates are low, but as redundancies increase and fear for jobs arises then does not amtter how cheap rates are if you cant repay then it is irrelevant...rates int he USA and UK are much lower than here and yet the housing mkts continue to crumble- BEWARE of false dawns.
- NZ'ers are way too complacent - last year the real estate institute president called a low in the mkt (at my last count on 5 different times!).
- so as for now- if you can buy at 10-15% below offering price and can afford the repayments, and have 30% equity then it might well be a good time to buy, but as one reader commented we are kidding ourselves it we think we can pick a bottom - they are generally only seen after they have occured.
My view is this latest pick up in sales is nothing more than a false dawn ahead of what will be some shocking corporate results this year (there are plenty more Fisher and Paykels out there), a massive increase in unemployment, as a country we produce low value commodities and the rest of the world aint buying them!, into winter we will see another price shock in the housing mkt and prices will fall further.
So buy now with deep pockets and a realistic view of adding to a portfolio, but be prepared to buy more as prices fall further.
On 2 March 2009 at 8:43 pm Naz said:
The same article that said 'Now is the time to buy' also says the market is due to fall further! The whole article was self-contradictory and made no sense. I'm personally happy for other people to buy now, it just removes them out of the market a six months or so down the road when the prices will be even lower...;). Equities, property, even US bonds are in a bubble. Best hold your cash or even better buy gold/silver, and just wait. On 6 March 2009 at 5:02 pm KEVIN said:
It looks like the Herald article was written with the editor giving a strict instruction to write a 'feel good' article and talk up a parlous market. In any event its a load of bollocks, we bought in Dec 2007 , and we are trying to sell at $100 k loss, and still no takers. Home-Buyers are gun-shy no one feels confident and while people look at show houses, offers are not forthcoming. A couple of fallacies are 1) Auckland population is growing through imigration ... this is true but to much lesser extent than ever before NZ is letting fewer immigrants in , and some are going back to their Asian country of origin. 2) Interest rates will stay so low..... the rates will have to climb to give a reasonable return at some point , and quite soon too , we cannot spend out way out of a recession on credit and 3) Fewer Building consents mean prices are going to rocket soon .... the reality is simply that fewer consents are a sign of a hopelessly oversupplied market, Auckland is not short of houses to let or for sale , just look at the To Let listings. The harsh reality is that Auckland property is seriuosly overpriced by International standards. As a rule-of-thumb the average house in US , UK , Canada or Oz is 3 times the average annual gross wage . In NZ it is 6 times the averge annual wage . This manes that NZ house prices need to halve to get to realisitc levels. Its not something we want to face up to, but its going to have to adjsut , it will either be slow (years) or quick if the international recession hits us soon. On 17 March 2009 at 2:33 pm Jeremy said:
I am amazed that with the latest drop in the OCR, most banks have hardly (or not at all) dropped their interest rates. The banks are so quick to make a buck and will do so until competition forces them to be more competitive. I think house sales will accelerate when the banks ease back on their massive profits and offer the 5% loans we are after. Commenting is closed
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Past experience has proved that there is a drop, then a plateau, then drop, then a plateau etc etc... Why would this cycle be any different?
I for one will not be buying now, for me I'll wait until I see the first raise in prices. Although I won't get the very lowest price it's not going to jump 20% in a month. I much prefer my odds of getting a deal than the landlord hoping to pick the bottom of the cycle
In my mind, buying now is a stupid risk - why would anyone bother