Housing to fall 15% not 30%
Opinion: Why I now see house prices falling ‘only’ 15%
By Bernard Hickey
Let’s get this out of the way up front.
I was wrong to predict a 30% fall in house prices by the end of 2010. I now expect house prices to fall 15% between the November 2007 peak and a trough in mid 2012, which means prices have a further 11% or so to fall from here.
It’s clear now that the housing market has not slumped as badly as I predicted it would back in March 2008 when I first forecast a fall of 20% to 30% over the next couple of years. I firmed up that forecast through late 2008 and early 2009 to say prices would fall 30% by the end of 2010.
I still think house prices remain fundamentally over-valued by around 30%, but a collection of circumstances have changed so that now I think the fall will be shallower and take longer.
I think house buyers and bankers are irrational enough to ensure the national median price measured by REINZ does not fall around 30% to around NZ$250,000 from the peak of NZ$352,000 in November 2007 as I originally predicted. The external factors that I thought would jolt the market back to reality have not happened and now look much less likely to happen.
I now think the median is likely to fall to a trough of around NZ$300,000 by mid 2012, which is about 15% below the peak and 11% below the current level of NZ$337,500. It should then rise with incomes back to that November 2007 peak of NZ$352,000 by the end of 2016. That means those people who bought in 2006 expecting capital gains of 10% or more a year will not see any capital gains for 10 years.
My view is not as pessimistic as it was, but it’s still more pessimistic than most. Here’s the 5 things that have changed since my March 2008 forecast that has prompted me to change my view.
Bernard goes onto spell out 5 points which suggest the economy can stand up better than he had predicted with a couple of outs on the manner in which the US banks are investing public funds from TARP and how weak the European banks really are. I agree with most of what he has written here, but believe the unemployment rate will damage a lot of these green shoots.
posted by Bomber @ 7:18 am
7 comments
7 Comments:
So you have changed your tune from two weeks ago when I took to task Hickey's prediction that housing prices would fall by 30%. The evidence wasnt there to support his thesis.
There are signs that the construction sector is lifting, development is starting again and there seems to be more positivity around. I agree with Hickey that the days of a 10% pa return in property may be over (but any 1st year student of finance will know that a healthy return (using TVM and/or risk analysis) is a few percentage points above bank lending rates.
When BH says it, it matters, when scott the bossman says it, it doesn't. Seeing as you have been part of the right wing chorus denouncing BH from the start I hardly see quoting him now helps your right wing bullshit cause Scott. You still live in la la land that it's all gonna be okay, all BH is saying is that it won't be as bad as he predicted.
I dont live in la la land. I have spent the last 5 years working in property at the coal face. Currently back at varsity at the same time doing property studies to formalize my experience. Its interesting that you consider a) experience and b) education to be "la la land". As opposed to what? Being a commentator as BH is?
I have been consistent that this is a deep recession. Because I disagreed with BH doesn't mean I am part of a right wing chorus - all it means that I have a different opinion. I respect Hickey but I dont necessarily agree with him. I respect you, but don't agree with you on everything.
What Uni are you back at?
sdm goes to the Wangana, which explains a lot
I have already an MA (Hons) from Auckland and am now at Massey. Did you get School Cert Anon?
Yeah, and what the hell is wrong with the Wananga anyway? Good people doing good things at the Wananga. I don't always agree with what Scott has to say, there's plenty of evidence of that on this site, but attacking his education is not only low, but it also happens to be 100% wrong.
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