12 February 2009
Take a Deep Breath
The question on everyone’s mind is, ‘Are we really in a recession? Or aren’t we?’
We read or hear about huge staff lay-offs around the world, massive drops in corporate profits (or historic losses), banks falling like dominoes. Presidents, Prime Ministers and politicians openly talk of disasters, crises and even use the dreaded ‘D’ word. Depression.
Yet, when we go about our daily business, the restaurants appear full, the shops appear to be fairly busy (mostly), cars still clog the motorway, and expensive boats of all sizes still cruise the harbour.
‘What recession?’ you may well ask.
The news tells us that interest rates have been slashed (even if these haven’t flowed through to our mortgages yet — see my earlier column), and around the world emergency measures are being taken. Mortgagee sales and company liquidations seem to flood the daily papers and it all seems rather depressing.
Then ask yourself a simple question: have you been personally affected?
Are we perhaps the victims of a con-job by politicians who are playing the ‘crisis’ theme because it makes us easier to govern and control? Certainly that’s one possible suggestion from President Obama’s recent fireside chat. He is seen to appeal direct to the American public to send a message to their local congressman to pass his ‘new and improved’ bailout package.
I think it is a mixture of both good and bad. Yes, there is a deepening recession which will get worse before it gets better and yes, I think the politicians are hyping it up to their advantage.
But I sense that the recession will be shorter and shallower then we are being led to believe. In my opinion, it is more likely that we will soon enter a long flat stage, perhaps next year — which, by the way, given the alternative, is fine by me.
I can tell this from my mentoring and consulting clients — who tell me of their successes or failures. Many are still upbeat and enthusiastic, seeing new opportunities ahead rather than collapse and doom.
This, among other things, gives me an insight and some perspective on what is happening in the market right now, rather than waiting for stale statistics to tell us when it’s far too late. Furthermore I keep in very close contact with valuers and solicitors who confirm that conveyancy and enquires have picked up and are much more positive compared to a few months ago.
The worldwide printing presses keep rolling — producing unimaginable amounts of money …
4 February 2009
The Myth of Housing Affordability
There has been some noise in the news media of late: there are claims that housing has become more affordable due to influence of lower interest rates and lower median prices.
Excuse me while I laugh.
The fact is that housing is now even more un-affordable than before.
The sort of nonsense that says otherwise is typical of the spin that vested interest groups such as the banks, spruikers, and bureaucrats promulgate — not to mention journalists who regurgitate the so-called ‘facts’ without necessarily questioning the validity of the claims.
Let’s look at the figures for a start.
Below is the comparison table of the world’s least affordable housing (wages versus prices) in years and months required to pay off the average house if living expenses are ignored.
1. Australia — 6.0 years
2. New Zealand — 5.7 years
3. Ireland — 5.4 years
4. Britain — 5.2 years
5. Canada — 3.5 years
6. USA — 3.2 years
(source: Demographia)
From this table we can see that Kiwis and Australians are right up there at almost double the USA figures — despite the USA average house price having fallen around 25% in the past year or so. Put the other way, wages would have to almost double in NZ to match the affordability of the USA housing market (which itself is in deep distress).
The following report prepared by the Reserve Bank etc in March last year makes worth while reading. In a nutshell it confirms what we all know: Home affordability has decreased alarmingly in the past decade — both for renters and prospective home owners. …