How The Doomsayers Were Proven Wrong (column)

Olly Newland’s Column, November 2010

Olly Newland September 2010

Olly will be part of Empower Education's MARKET UPDATE evening, Auckland 7th December (click photo for details)

A FEW DAYS AGO Quotable Value (QV) came out with its monthly report and the headlines that followed were totally predictable:

“Property prices sliding” or “House values slip again” etc.

What a lot of rot.

Government-owned valuer Quotable Value (QV) has reported house values continued falling in October and are now down 1.6% from March.
QV said prices rose 2.8% between October 2009 and March 2010, but have since fallen. However, they remain 1.1% above October a year ago.
“The low level of sales activity we have seen all year continued through October, with sales well below both last year and the long term average,” said QV.co.nz Research Director, Jonno Ingerson.
“There is no sign of the traditional spring surge in sales, and we don’t expect any significant increase in sales before the New Year,” he said. Full QV stats and commentary here.

If you read that carefully, the part that really matters is buried three 3 lines down, and that is that prices are actually 1.1.% higher than they were a year ago.

The error made by many is to look at monthly sales figures and grab the the most catchy headline … never mind the facts.

When analysing big ticket items such as house prices (which react very slowly one way or the other) it is the annual trend that must be watched, not the the day-to-day or monthly statistical wobbles. Look at this:

Monthly housing index chart here from interest.co.nz.

So looking back over the last twelve months we see that prices were steady with a UPWARD bias. (If anything.)

Exacerbating the whole matter is the fact that sales volumes are at a very low level. As prices are still staying relatively firm it proves what I have always known that 95% or people might want to sell or buy do not have to buy or sell … so they stay put instead.

So we have no stampede of property onto the market, and forced sales remain mainly in the poorer areas where investors got tucked into buying slums by the now defunct “gee whiz” spruikers who pushed them into them.

So much for the doomsayers who predicted a 30% crash in property prices, together with the collapse of civilisation as we know it. (Sorry to keep bringing it up, boys.)

It hasn’t happened. And it won’t happen, for several irrefutable reasons:

Read the rest of this column …

Posted in News & Articles | Tagged | 3 Replies

3 thoughts on “How The Doomsayers Were Proven Wrong (column)

  1. Hi Olly,

    Thanks again for another great article, fantastic. Everything you have commented on is what I am personally seeing in the Auckland market so it makes perfect sense.
    Much appreciated.

    Tom

  2. Hi Olly,
    Just an observation about the poor fellow with his bed creation and all the
    grief created for him by the sale of his patented concepts and business to
    some Asian investor/firm. We broker deals for the sale/merger and/or
    acquisition of private companies/businesses….one of the many rules we
    stick by is the ‘show-me-the-money’ rule..! I wonder if this poor chap was
    taken in by a party ‘buying’ his business without someone experienced in
    such things going to bat for him and protecting his interests (which is
    legally required in addition to ethical obligations). Unless an unambiguous,
    bona fide payment structure has established to achieve settlement, one
    that’s been through a due diligence process with competent legal advice by a
    commercially savvy law firm, then there is in fact no deal at all. Many a
    business owner has come to grief when they believe they’ve ‘…made a deal
    to sell their business’ and ‘I didn’t even have to pay some broker for
    it’….it’s a minefield. And that’s before the ruthless bank-beast bares its
    teeth (and its true nature)..!
    Just like property, when it comes to selling or buying a business there’s
    plenty of people who can be taken for a ride on either side of that fence by
    believing the amazing stories they hear about ‘…I heard about a guy who
    sold his firm for millions to some big Aussi/American/Asian company that was
    buying up kiwi businesses’. Now that truly belongs on a well known billboard
    just like..’it’s different this time’ and ‘..how to get wealthy through
    property with no risk and only a $1000 down..’
    Cheers
    Alan

  3. Olly may be right in 2010 about his comments on property,
    but the financial crisis is NOT over. The recession is going to get more
    ugly before it gets better, Europe, the UK and the USA are blotted in debt,
    when that collapses asset prices must go down. The last thing on my mind at
    the moment is buying property, yes in the future, say 2015-2016, not now.

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