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What's best? Renting or buying
Sunday 26th of September 2010
What’s best renting or buying? Radio New Zealand asked me that question last week, partly because another one of those affordability surveys had come out and headlines screamed out Queenstown and Auckland were the most unaffordable places to live.
One can ask why do you need a survey to tell you that? Queenstown is a very unique place in New Zealand and the home of some serious wealth. (Personally it hasn’t had that much appeal to me, but hey I enjoy Rotovegas!)
Auckland is a different story and illustrates why I don’t like these surveys – that is they are all about trying to say the housing market is one big amorphous mass. In reality it’s lots of little markets. You could even think of it in sharemarket terms where each individual house is a separate company listed on the exchange.
House, like shares, often trade at prices which are different to fundamental economic valuations. We see that in the housing market at present where prices are around five to six times the average wage, when three to four times is considered “fair value”.
Coming back to the story and the Auckland headline. It is silly to make such a bald statement as it is such a big market. Sure plenty of bits are seriously unaffordable, while others are the opposite.
After the RNZ interview I had a good yarn with Harcourts chief executive Hayden Duncan. While he had lots of interesting things to say one thing was the state of the market. It’s a two speed job at the moment with the middle and top end doing well with good sales volumes and prices and, if anything, a lack of stock on the market. Those who do sell are making reasonably quick sales at good prices.
At the other end of the market, which tends to be the preserve of first home buyers and property investors, it’s a different story. High stock levels, low sales volumes and soft prices.
To me this, along with current interest rate forecasts, suggests to me that it is a great time for both investors and first home buyers.
It’s quite a different story to what the affordability surveys show.
One can ask why do you need a survey to tell you that? Queenstown is a very unique place in New Zealand and the home of some serious wealth. (Personally it hasn’t had that much appeal to me, but hey I enjoy Rotovegas!)
Auckland is a different story and illustrates why I don’t like these surveys – that is they are all about trying to say the housing market is one big amorphous mass. In reality it’s lots of little markets. You could even think of it in sharemarket terms where each individual house is a separate company listed on the exchange.
House, like shares, often trade at prices which are different to fundamental economic valuations. We see that in the housing market at present where prices are around five to six times the average wage, when three to four times is considered “fair value”.
Coming back to the story and the Auckland headline. It is silly to make such a bald statement as it is such a big market. Sure plenty of bits are seriously unaffordable, while others are the opposite.
After the RNZ interview I had a good yarn with Harcourts chief executive Hayden Duncan. While he had lots of interesting things to say one thing was the state of the market. It’s a two speed job at the moment with the middle and top end doing well with good sales volumes and prices and, if anything, a lack of stock on the market. Those who do sell are making reasonably quick sales at good prices.
At the other end of the market, which tends to be the preserve of first home buyers and property investors, it’s a different story. High stock levels, low sales volumes and soft prices.
To me this, along with current interest rate forecasts, suggests to me that it is a great time for both investors and first home buyers.
It’s quite a different story to what the affordability surveys show.
Comments (3)
Philip Macalister
Use there graph to chart NZ house income relative to house prices against the rest of the world.
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<br />http://www.economist.com/node/14438245?story_id=14438245
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<br />For first home buyers - might be a better play to rent until houses revert to affordable levels.
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14 years ago
John Butt
Well said!
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<br />Interesting that bloggers like yourself provide more accuracy than reporters. I listened to a media discussion on the weekend where the concern was about bloggers being able to say what they like, but reporters must represent the facts. When that occurs in the property space, rather than the reverse, we will all be better off. It is way too easy for reporters to say that they are reporting the comments of others, but when they do little if any investigative work and quote averages as though they are the facts, then we are poorly informed by the reporters.
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14 years ago
Brian Dettling
Admin if you look at the graph with the start period of 1999 Q4, the story is different, the increase is higher in aust, Britain and South Africa.
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14 years ago
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