Olly Newland’s July 2010 column
In this column, I would like to cover a variety of topics, as the last few weeks have been crammed with ‘news’ and opinions about the property market — and much of it arrant, dangerous nonsense.
Some folk in the news media and posters on various websites have had a field day predicting the imminent collapse of the property market. They continue to be spectacularly wrong, it should be noted.
These deluded commentators seem to believe that if property prices fell by 20% to 30% (as some have predicted) then they, and their children would be able to buy a house more cheaply in the future and that would be a wonderful thing. They think a massive drop in the market would make housing ‘more affordable’.
What they cannot understand is if that really happened hundreds of thousands of Kiwis would be out of work, much of our economy and industry would come to a virtual halt, the banks would collapse and New Zealand would be reduced to a nation of ragged beggars left to shuffle through the two dollar shops and rifle garbage bins.
Jobless and with an economy in ruins it wouldn’t matter if houses were a third of their present price. They would still be unaffordable.
It will cause some consternation to these nay-sayers to learn this week, that house prices are still well up on this time last year despite the usual upside down view some in the media always make of these things.
link: http://nz.biz.yahoo.com/100711/3/k6u6.html
I always derive much amusement in the way the media portray good news through the wrong end of the telescope. The headline in this example says: “House prices fall further in June”.
It’s not until you read down further that in fact house prices are still 5.2% higher than at this time last year and the slippage (if you can call it that) is a statistically insignificant 0.4%. Put another way, it is effectively a yearly increase on the current average price of $404,715 by a respectable $21,045 (or approximately twice the rate of inflation!)
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I have to agree with you Olly, and you know I hate agreeing with you.
I can never understand why with new house prices so high the trade’s men whom I deal with in the apprentice side of things have their rates being cut even more.
I was in Aus’ a while ago, a three leveled house on the Greg Norman Golf course with a High spec finish was being built for around $980.00 per square metre and the trades where getting great money
Here the same house would be $1700.00 per square metre and the trades can hardly pay their GST
A lot of job sharing going on amongst the trades as well at the moment, not taking on new staff
Cheers
Leon
Comment by Leon — July 14, 2010 @ 9:32 am
Thanks for your latest column, which I read with interest. I find it
difficult to understand the property market as it is without the
media confusing matters further. Even with my rudimentary knowledge I
can follow the QV stats and have noted that Taranaki values in
particular have continued to rise unabated. Therefore I often find it
strange to hear how everything is falling. Thanks for giving some
real perspective on the matter.
Comment by Julie — July 14, 2010 @ 10:56 am
Hi Olly,
Do u think your views may be somewhat clouded by the fact u are a property man..???
U seem to see the world in terms of Property.
Don’t be too hard on the Govt.
Our Govt is providing life support to the tune of $250 million a week… Be Thankful.
Other Govts around the world are doing the same.
If the world moves into a double dip.. protracted recession… what will Govts do..???? Catch the austerity bug.???
Borrow themselves into a deep hole..??… both have profound implications. ( the private sector is too indebted , and consumer spending is too large a part of GDP… to expect it to pull us out of recession )
Do u really think now is a good time for people to be borrowing up and going out buying property..???? times have never been more uncertain. ( I’ve read your stuff at interest.co.nz),…. U seem to have toned done your bullishness in your latest piece.
Consumers have been borrowing to consume. .. That shifts, what should be, tomorrows consumption to today…. we have been taking from the future.
Of course consumers need to retrench.
Read George Soros latest book… He talks about a paradigm shift from consumption to saving. ( ie. consumers no longer borrowing to consume).
This shift has profound implications…. ( bear in mind that in USA consumers made up about 70% of GDP )
As a Real Estate Man … u should be aware of this… its’ obvious.
I have to say… I have never seen Real Estate boom in a Recession….. and this recession is different from any I have seen before…. It is not responding to the massive stimulus that Govts, globally, have thrown at it.. .. but that was ,kind of, to be expected.
Cheers
R
ps. I do enjoy reading your stuff… you have street smarts.
Comment by R — July 15, 2010 @ 8:09 am
Thank you Olly.
Your articles, opinions and astute analysis of the property market, and
reasons why, are a winner with my partner and myself.
Thank you for sharing your vast experience and foresight with us, 2 of
the “masses”.
We have followed your career in property with much interest over many
years and your books have been a treat (and profitable!).
Best Regards from 2 appreciative property owners,
Trevor & B
Comment by Trevor — July 17, 2010 @ 3:29 pm