Property costs in NZ - the heart of evil

[SPman]

And you say salaries are way higher in Oz...but so are property prices yes - in the cities, beer, hell yes - particularly NZ boutique beers, eating out, yes - anything involving employing local labour - can't have higher wages without higher labour costs, cars, BIKES

not new they aren't. Reckon on 30% higher wages and 30% lower purchase price - in Aus. dollars! GSXR600 for $13,999. VW Polo 77Tsi - $22k on road, for example, and lots of cheap 4wds
Properties outside the major cities are cheaper - we couldn't replace what we have, 100k outside Perth, in NZ, even with selling up and the better exchange rate. Property prices in places like Perth are high, and there is a serious lack of rental accomodation

[carbonhed]

Yes. My brother just bought a place in the States, New Jersey about an hour out of New York, and he got twice the house he'd have got over here for the same coin. Ridiculous.

[mashman]

OP ... our subdivision cost the developer 5 mill supposedly. Land is currently selling for 230k+. they are expecting 1500 houses. We got our land for 145 as someone wanted a quick sale. Take 145k as the average and multiply that by 1500. Reckon they made much money. Of course they have to put in amenities and do some form of land prep, but I highly doubt the whole thing came to any more than 10 - 15 mill. There's no money in it though. the best thing is that these guys go on to develop more land for people to buy cheaply . Go talk to the bank, I'm sure they'll give you a great rate for letting your start a business, or you could go on Dragons den with your idea and borrow money off them. Granted they'll all want a share of your idea, but why shouldn't they if they've lent you money? Dropping house prices will have no affect on anyone, other than those who will be stuck with a house that they can't sell because the house value will no longer cover the mortgage and they'll be paying well over the odds for the rest of their lives.

I've lived in the UK and stuff there is CHEAP (if you stay away from London and the south of England generally). I bought a house there for £130k ($260k or so at today's rates) for a house brilliantly engineered, using permanent materials... and it was WARM!! Even in -10*C cold snaps. And I didn't have to do dumb stuff like replace guttering, seal windows, paint the roof or weatherboards...it was built in 1926 and it hadn't needed any major building work (other than the addtion of REAL central heating - Pomes will know what I mean). Take that crap NZ houses!

Stuff is cheap in the UK? Where? I've yet to see it? unless you're talking about poundstretcher and primark you're having a larf. The houses have PVC windows and that is the main difference between UK houses and here for warmth and I lived in the frozen norf for kickin on 20 years, but yeah, I miss my central heating, ohhhhhhhhh yeah.

[Brian d marge]

I have just come back from New Zealand and I can say that Japan is slightly cheaper sort of

you get a NEW house 3 bed rooms roughly 10m x 6 ( no Im not getting off my arse to measure it )

a small front garden ( 6 x 3 ) and all the mod-cons inside ( a nice lady tells you the bath is ready and the water is cleaned a recirculated and kept warm until you tell her to stop, ( no it aint the wife )

that lot cost me 15 million yen but over 40 years and well under the 30 % morgage stress mark

Your food ! eating out ..HOLY CRAP expensive ( that was using Japanese money ) there were a few other expensive thing as well .....

Now Im NZ wages spent in NZ and Jap wages spent in Japan ... ie a beer is X % of my weekly $

I reckoned that to have a similar lifestyle as I have here, the house would have to cost around 100 to 150 000 Nz

waimate? anyone ? and the work is?

NZ really does need to invest in the future new business ( which it is kind of doing ) ,,,and move away from agriculture

Stephen

[Flip]

Big diddums OP.

Why would any new landlord want to tie up half a million dollars in an asset that has no capital gain, that he has to place in the hands of others, that needs constant maintenance, that can be wrecked and all he can get back is 4 weeks rent, that he can not loss adjust against other income (which every other business can do), just to keep you in the luxury you think you are entitled to?

In the 80's landlords were gods, you could not get a flat for love nor money. The govt did not have the funds to keep up with the requirements for state housing sothey made the losses landlords had tax deductable, which attracted a lot of ma and par investing, the nett result was good properties became available for rent and rents were low.

Why would anybody want to tie up their funds in a low return high maintenance investement that pays them less than the current morgage rate? I would suggest you are going to see rentals going up another 10-25% in price over the next few years and the avalibility really going down.

[BoristheBiter]

Ha ha, bet thats what my neighbors thought before I bought this place.

That's why I live in the country.

[merv]

I have just come back from New Zealand and I can say that Japan is slightly cheaper sort of

you get a NEW house 3 bed rooms roughly 10m x 6 ( no Im not getting off my arse to measure it )

Stephen

A comment was made further back about expectations. 30 - 40 years ago in NZ you did start off buying the 3 bedroom 100m2 box, broke in the section, laid the paths etc and as your finances improved you could move up to better luxury. The yoof of today wouldn't be interested in a box let alone one only 60m2 like you have in Tokyo unless they are into apartments. They expect about 200m2 plus, and its got to have all the bells and whistles and they want it all pre-landscaped - no manual work thanks, so the price is comparatively high compared to figures of yesteryear.

[HenryDorsetCase]

Big diddums OP.

Why would any new landlord want to tie up half a million dollars in an asset that has no capital gain, that he has to place in the hands of others, that needs constant maintenance, that can be wrecked and all he can get back is 4 weeks rent, that he can not loss adjust against other income (which every other business can do), just to keep you in the luxury you think you are entitled to?

In the 80's landlords were gods, you could not get a flat for love nor money. The govt did not have the funds to keep up with the requirements for state housing sothey made the losses landlords had tax deductable, which attracted a lot of ma and par investing, the nett result was good properties became available for rent and rents were low.

Why would anybody want to tie up their funds in a low return high maintenance investement that pays them less than the current morgage rate? I would suggest you are going to see rentals going up another 10-25% in price over the next few years and the avalibility really going down.

its happened in Chur chur over the last few months. Will get worse

[Brett]

OP ... our subdivision cost the developer 5 mill supposedly. Land is currently selling for 230k+. they are expecting 1500 houses. We got our land for 145 as someone wanted a quick sale. Take 145k as the average and multiply that by 1500. Reckon they made much money. Of course they have to put in amenities and do some form of land prep, but I highly doubt the whole thing came to any more than 10 - 15 mill. There's no money in it though. the best thing is that these guys go on to develop more land for people to buy cheaply . Go talk to the bank, I'm sure they'll give you a great rate for letting your start a business, or you could go on Dragons den with your idea and borrow money off them. Granted they'll all want a share of your idea, but why shouldn't they if they've lent you money? Dropping house prices will have no affect on anyone, other than those who will be stuck with a house that they can't sell because the house value will no longer cover the mortgage and they'll be paying well over the odds for the rest of their lives.



Stuff is cheap in the UK? Where? I've yet to see it? unless you're talking about poundstretcher and primark you're having a larf. The houses have PVC windows and that is the main difference between UK houses and here for warmth and I lived in the frozen norf for kickin on 20 years, but yeah, I miss my central heating, ohhhhhhhhh yeah.

Running with your numbers:

Purchase: $5,000,000 (Land purchase = Zero rated, no GST claim back). (Purchase price sounds cheap though...)
Development of 1500 sites @ $60k per site = $90,000,000
Total Sales at $145k per site = $217,000,000
PAY GST on sales of $217m = $28,304,000
CLAIM GST on development costs = $11,740,000

Gross Profit:
$105,436,000.
(Holding costs (finance etc.) need to be deducted from this as well as other business operation costs. Finance for a development like this is likely to be 11 or 12%, say it took them 3 years to do development and sell all sites, finance costs would be $34m.)
These are very very rough numbers, but yes....reasonably profitable.

[Flip]

its happened in Chur chur over the last few months. Will get worse

Pull 10,000 houses from the market and see what happens. It's not the only place, I own a couple of houses in Wellington. I had a call from the blue last week from some one offering me a lot more rent for one if I boot the tennant who has been there for the last 5 years.

My Dad has just sold off 4 houses in Riccarton with a total of 17 bedrooms, the big one with 8 bedrooms will probably be used as a bording house, the other 3 have gone back into private hands. He can't be fucked anymore with the grief for no return. The tennants get the bad news this week. If I follow the other side of the OP's logic I could claim that there is a whole bunch of students and 3 families looking for a new place to live in a very tight rental market because the BRT and their lacky mates in the National goverment decided that the LAQC status meant that ma and pa investers were not investing in their "solid as I recon" finance industries.

[Winston001]

Does anybody else here think that property costs are what is bringing NZ down and making it unlivable?

Hear me out: Tax favours property ownerhsip instead of ownership in shares/bonds/business ventures etc....

Wrong.

The government removed the tax deductions for rental housing two years ago. Plus losses are now ringfenced and unable to be spread across your other income. As a result many mum and dad owners of a rental house have faced negative equity and been selling which is why the property market is depressed.

Nevertheless your main points are well made. Our housing is expensive in places where the bulk of the population live. The longterm average house price is 3.5x average income but for the last decade it's been 6x and stays there despite the global meltdown. It defies economic logic.

Building is expensive here because of tight regulation among other reasons. Earthquakes. Back in 1991 the government tried to free up the regs and what happened...leaky homes. Shoddy building. Ordinary people ended up facing the loss of their homes and financial ruin which continues to this day.

So removing building controls is a non-starter.

[lakedaemonian]

You can get a 10-15 year old waterfront 3-4 bedroom house with a big garage, large section, and possibly inground semi/indoor pool in Florida, USA for $150-200K......which is approx $250K NZ.

But some poor unlucky bastard probably paid $500-750K US for it 5-7 years ago.

The same reasons why property is so cheap in the US, but used to be so incredibly expensive(real estate price collapse of up to 75-80% in places in Florida, Nevada, California) is the massive over cheap credit bubble and credit collapse.

In many places in the US(differs state by state) there is no personal guarantee on the owner with the property....you can do what's called "jingle mail", mail the keys to the bank holding the mortgage and walk away if you're mortgage is much higher than the current value of your property.

NZ has been protected a bit by this because our lending didn't get AS silly(like 125% of overinflated home value and falsified income requirements) and every mortgage holder in NZ has a personal guarantee on the mortgage.

So we're still quite inflated property wise.

Still far better than China though......in some places in China a home(which is really just a poorly made shitbox apartment on long term LEASE) is going for 20-30 times the average annual wage for a professional.

China's got a big property bubble...a real BIG one that could make the US/UK property bubble that popped in recent years look like an appetizer waiting for the main course.

If/when China pops(and signs are showing of stress although China's command economy can try to stem it far faster than the US/UK) it's going to hurt down here....and even the lucky country will take a fair whack.

[The Pastor]

op ... Our subdivision cost the developer 5 mill supposedly. Land is currently selling for 230k+. They are expecting 1500 houses. We got our land for 145 as someone wanted a quick sale. Take 145k as the average and multiply that by 1500. Reckon they made much money. Of course they have to put in amenities and do some form of land prep, but i highly doubt the whole thing came to any more than 10 - 15 mill. There's no money in it though. The best thing is that these guys go on to develop more land for people to buy cheaply . Go talk to the bank, i'm sure they'll give you a great rate for letting your start a business, or you could go on dragons den with your idea and borrow money off them. Granted they'll all want a share of your idea, but why shouldn't they if they've lent you money? Dropping house prices will have no affect on anyone, other than those who will be stuck with a house that they can't sell because the house value will no longer cover the mortgage and they'll be paying well over the odds for the rest of their lives.



Stuff is cheap in the uk? Where? I've yet to see it? Unless you're talking about poundstretcher and primark you're having a larf. The houses have pvc windows and that is the main difference between uk houses and here for warmth and i lived in the frozen norf for kickin on 20 years, but yeah, i miss my central heating, ohhhhhhhhh yeah.

dunno hoe good you are at maths, but 145000*1500 = 217.5 million.

Minus the 5 mill cost (i think it will be more like 50 -100mill) and there is a stack load of profit

1500 lot subdivision, where is that? Its massive

[Brett]

dunno hoe good you are at maths, but 145000*1500 = 217.5 million.

Minus the 5 mill cost (i think it will be more like 50 -100mill) and there is a stack load of profit

1500 lot subdivision, where is that? Its massive

There are quite a few costs that need to be taken into account. My numbers above assumed 3 years to sell all sections...probably far too optimistic...could take up to 10 years! At 10,11,12% interest rates, doesn't take long for profit to significantly reduce. 1500 houses are a lot to sell, I agree.

[Smifffy]

IMO what keeps most NZ investors out of the shares/bonds markets is that the directors and executives of the issuers are either incompetent or crooked, or both. When people invest their money in what is laughably called 'the productive sector', the executives and directors, rather than using that money to continue to improve their productivity, turn around and give themselves large pay rises and assorted other perks for doing such a sterling job of raising funds, and therefore company value via the securities markets.

What do they do with this new found wealth? Most often it would appear that they 'invest' it in beachfront property, large houses in leafy suburbs, or in times past have started to dabble in property development of their own. What is not funneled through to themselves via payrises is used to lease exotic company cars, international "business" travel to attend bullshit conferences and trade shows for the next tier of management, to give them the illusion of being employed by a successful business, whose future is assured.

Fuck them.

I'll use my money to fund my own capital investment projects thank you very much. If I wanted to fund the purchase of a waterfront property it might as well be my property as some corporate fat cat's. The returns offered by the NZ markets is pitiful compared to the risk that investors are exposed to.