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From what I've heard there is a massive supply issue. Rates will only fall if supply increases or if demand drops. From what I've heard, the demand isn't expect

From what I've heard there is a massive supply issue. Rates will only fall if supply increases or if demand drops. From what I've heard, the demand isn't expected to fall and there are limits in the supply side of things due to all sorts of issues many stemming from covid and the long recession we had on the housing market post crash of 2008. Ideally demand will go down because things as it stands are just not affordable to most. The rent also is going way up, so that drives housing prices too.

tmnvix 4y ago
We had an 'undersupply' problem in NZ until very recently. It seemed like it was all the media ever talked about. Then inflation hit, rates went up, and property prices started declining rapidly (current rate of decline looks like NZD5000/w on a median priced home over the past few months). Suddenly, the number of properties on the market is up 2-3x in the major cities and available rentals have doubled in places. Rents are falling even as commentators claim landlords will try to pass on their increased holding costs to their tenants. Where have those properties all come from? Consider that all properties are either investments or owner-occupied. By definition owner-occupiers don't keep empty (or underutilised properties - assuming second homes and holiday homes can be categorised as investments). Therefore, if there are more investors active (or more correctly, investment properties) in the market, the proportion of empty or underutilised homes is going to be higher. Investment activity in the market has undoubtedly been increasing for some time. What appears to be happening is that our underutilised housing stock is now being revealed as investors panic. The same thing happened in Ireland during the GFC. There are many reasons investors will leave properties empty or underutilised during a speculative boom (renovating to flip, on the market, good old fashioned landbanking, a convenient city pad or holiday home, etc). There is much more of this about than people realise. I am very confident that rising interest rates are going to turn out to be a good thing for renters and first time buyers. It'll just take a bit of time and some economic upheaval.
- jseban 4y ago
  There's a lot of flexibility in how much living space a person is using also, it's an order of magnitude difference depending on how much money they have. People used to live a whole family in a one room apartment, and now we have single divorced boomers living in whole houses alone. I think people adjust a lot here depending on the economy
  - tmnvix 4y ago
    That's a good point. It's interesting that for the past 15 years or so the average household size in NZ has remained at about 2.7 despite a housing crisis with more people living in cars, converted garages, etc. I always assumed that the more crowded households were 'balanced out' by an increase in the number of smaller dwellings with fewer people (specifically apartments) but it could also be an increase in the number of people living just 1-2 in larger dwellings.
  - yakak 4y ago
    Very true. California is an interesting one though with their occupancy rules. Very low density could reduce in a crunch but people who would go to the highest density are prevented from doing so by the landlord owned legal system.
  - irrational 4y ago
    My boss (not divorced or a boomer, but definitely single) lives alone in a 5,000 foot gorgeous home up in the hills. It’s crazy.
- dan-robertson 4y ago
  An alternative explanation would be reduced demand. If interest rates have been around 3% for a while and you’re now looking at 8–10% (and there’s some expectation that house prices will fall) then maybe getting a mortgage to buy a house isn’t such an attractive proposition. Lower demand over a reasonable amount of time should lead to more properties being on the market.
adam_arthur 4y ago
There is no supply issue, only an active listings issue. Which is rapidly clearing up as purchase demand has fallen off a cliff. People touting supply issues don't understand the difference between number of housing units and inventory. The number of housing units per person is at an all time high
- tmnvix 4y ago
  I can confirm this in the context of NZ. During the past 25 years the number of residences relative to the number of households has increased substantially from roughly 3.5% more residences to something like 6.5% more. All while the number of people per household has declined slightly and prices have increased astronomically. Very frustrating this past decade to have the entire debate framed around building more houses as the only solution to deal with this 'undersupply'. In my opinion a speculative boom has created excess demand and increased the number of underutilised properties. Thankfully rising interest rates appear to be dampening that excess demand (to put it mildly).
  - thelamest 4y ago
    What you wrote doesn’t appear to be true. Divide columns B7 on sheets 2 and 3 in the NZ data (https://www.stats.govt.nz/information-releases/dwelling-and-household-estimates-march-2021-quarter https://www.stats.govt.nz/information-releases/dwelling-and-...). The all-time high of 1.06 happened in 2012 and the ratio has since fallen back down to around 1.043, just a bit above the 1.04 value from the 1990s. My prior is that there is an undersupply, signalled by prices, and I’m afraid this method tends to underestimate it. First, household formation (as in, moving out and starting a family etc.) depends in part on housing availability. Second, internal migrations due to urbanization cancel out in national level data – for every move to a city, there may now be an empty rural unit, and a crowded urban unit. PS Remember too, that there’s a natural churn to housing – people sell/renovate/etc. on average once every X months – therefore we need at least 1/X of excess housing to smooth it out. This is an absolute lower bound that assumes people don’t differentiate between any two houses, but are willing to randomly swap e.g. a 120 sqm in the central business district for a 30 sqm in a rural area. This assumption is obviously wrong.
aj91fl48znv3mpk 4y ago
It was reported that, in a major county near me, about 1 in 2 homes sold last year were to businesses. Individuals are being squeezed from participating in traditional supply and demand markets.
- carom 4y ago
  Many people purchase properties through LLCs to protect their personal assets. The Blackrock style companies make up a very small percentage of the market.
- adam_arthur 4y ago
  It doesn't really matter who buys them. What matters is the fundamentals relating to number of dwellings vs number of people
xbmcuser 4y ago
Demand is going to crash with many not being able to afford mortgage payments or rents this will result in prices tanking and people having to top up as property values will be lower than mortgages. I have a feeling commercial property values are being artificially kept inflated by banks, realtors as well as the city governments as lower prices are going to be very painful for everyone. But as defaults start snowballing we will see the dominos fall similar to 2007-8.
- hackererror404 4y ago
  As a want to buy a home person... I certainly hope you are correct. As it stands now, it just doesn't make sense to buy a home.

tmnvix 4y ago

We had an 'undersupply' problem in NZ until very recently. It seemed like it was all the media ever talked about. Then inflation hit, rates went up, and property prices started declining rapidly (current rate of decline looks like NZD5000/w on a median priced home over the past few months). Suddenly, the number of properties on the market is up 2-3x in the major cities and available rentals have doubled in places. Rents are falling even as commentators claim landlords will try to pass on their increased holding costs to their tenants. Where have those properties all come from? Consider that all properties are either investments or owner-occupied. By definition owner-occupiers don't keep empty (or underutilised properties - assuming second homes and holiday homes can be categorised as investments). Therefore, if there are more investors active (or more correctly, investment properties) in the market, the proportion of empty or underutilised homes is going to be higher. Investment activity in the market has undoubtedly been increasing for some time. What appears to be happening is that our underutilised housing stock is now being revealed as investors panic. The same thing happened in Ireland during the GFC. There are many reasons investors will leave properties empty or underutilised during a speculative boom (renovating to flip, on the market, good old fashioned landbanking, a convenient city pad or holiday home, etc). There is much more of this about than people realise. I am very confident that rising interest rates are going to turn out to be a good thing for renters and first time buyers. It'll just take a bit of time and some economic upheaval.

jseban 4y ago
There's a lot of flexibility in how much living space a person is using also, it's an order of magnitude difference depending on how much money they have. People used to live a whole family in a one room apartment, and now we have single divorced boomers living in whole houses alone. I think people adjust a lot here depending on the economy
- tmnvix 4y ago
  That's a good point. It's interesting that for the past 15 years or so the average household size in NZ has remained at about 2.7 despite a housing crisis with more people living in cars, converted garages, etc. I always assumed that the more crowded households were 'balanced out' by an increase in the number of smaller dwellings with fewer people (specifically apartments) but it could also be an increase in the number of people living just 1-2 in larger dwellings.
- yakak 4y ago
  Very true. California is an interesting one though with their occupancy rules. Very low density could reduce in a crunch but people who would go to the highest density are prevented from doing so by the landlord owned legal system.
- irrational 4y ago
  My boss (not divorced or a boomer, but definitely single) lives alone in a 5,000 foot gorgeous home up in the hills. It’s crazy.
dan-robertson 4y ago
An alternative explanation would be reduced demand. If interest rates have been around 3% for a while and you’re now looking at 8–10% (and there’s some expectation that house prices will fall) then maybe getting a mortgage to buy a house isn’t such an attractive proposition. Lower demand over a reasonable amount of time should lead to more properties being on the market.

adam_arthur 4y ago

There is no supply issue, only an active listings issue. Which is rapidly clearing up as purchase demand has fallen off a cliff. People touting supply issues don't understand the difference between number of housing units and inventory. The number of housing units per person is at an all time high

tmnvix 4y ago
I can confirm this in the context of NZ. During the past 25 years the number of residences relative to the number of households has increased substantially from roughly 3.5% more residences to something like 6.5% more. All while the number of people per household has declined slightly and prices have increased astronomically. Very frustrating this past decade to have the entire debate framed around building more houses as the only solution to deal with this 'undersupply'. In my opinion a speculative boom has created excess demand and increased the number of underutilised properties. Thankfully rising interest rates appear to be dampening that excess demand (to put it mildly).
- thelamest 4y ago
  What you wrote doesn’t appear to be true. Divide columns B7 on sheets 2 and 3 in the NZ data (https://www.stats.govt.nz/information-releases/dwelling-and-household-estimates-march-2021-quarter https://www.stats.govt.nz/information-releases/dwelling-and-...). The all-time high of 1.06 happened in 2012 and the ratio has since fallen back down to around 1.043, just a bit above the 1.04 value from the 1990s. My prior is that there is an undersupply, signalled by prices, and I’m afraid this method tends to underestimate it. First, household formation (as in, moving out and starting a family etc.) depends in part on housing availability. Second, internal migrations due to urbanization cancel out in national level data – for every move to a city, there may now be an empty rural unit, and a crowded urban unit. PS Remember too, that there’s a natural churn to housing – people sell/renovate/etc. on average once every X months – therefore we need at least 1/X of excess housing to smooth it out. This is an absolute lower bound that assumes people don’t differentiate between any two houses, but are willing to randomly swap e.g. a 120 sqm in the central business district for a 30 sqm in a rural area. This assumption is obviously wrong.

aj91fl48znv3mpk 4y ago

It was reported that, in a major county near me, about 1 in 2 homes sold last year were to businesses. Individuals are being squeezed from participating in traditional supply and demand markets.

carom 4y ago
Many people purchase properties through LLCs to protect their personal assets. The Blackrock style companies make up a very small percentage of the market.
adam_arthur 4y ago
It doesn't really matter who buys them. What matters is the fundamentals relating to number of dwellings vs number of people

xbmcuser 4y ago

Demand is going to crash with many not being able to afford mortgage payments or rents this will result in prices tanking and people having to top up as property values will be lower than mortgages. I have a feeling commercial property values are being artificially kept inflated by banks, realtors as well as the city governments as lower prices are going to be very painful for everyone. But as defaults start snowballing we will see the dominos fall similar to 2007-8.

hackererror404 4y ago
As a want to buy a home person... I certainly hope you are correct. As it stands now, it just doesn't make sense to buy a home.