Thursday, January 19, 2012

The Housing Market: Thoughts

Now, I am no housing guru. I sold my house nearly three years ago and removed debt altogether from my system. Will I buy a house again one day, yes, but not at these prices in New Zealand; especially Auckland. Could I be wrong; maybe.

The latest median house prices and sales volume figures are out from the Real Estate Institute. In Auckland, sales volume is up 28% and the median price down just 1%.

Maybe house prices in Auckland will hold up a little longer as people migrate internally. There has been an influx of people from earthquake ridden Christchurch for example. Also, external immigration is still supporting demand for housing in Auckland. Especially in the East Coast Bays.

Around the globe, house prices in major cities are holding in the middle price ranges. Migration to these cities from provincial towns is a factor as jobs are harder to come by. However, even cities, like Sydney, Australia, boom towns for real estate in the 2000s, are showing signs of falling house values.

The graphs below show what has happened to real value over the last 20 years. What do these figures mean? Well, you can now buy a house in New Zealand for the same amount of 'value' in gold ounces that you could way back in 1992. If you had been lucky enough to sell your house for 475 gold ounces at the peak in 2005, you would now be able to buy two houses with that same gold.

But, who can tell the future as to what happens now? There aren't any signs, other than immigration, to suggest that prices can maintain these values. Maybe, now that median prices are back to 1992 prices in gold ounces, that it's a bottom and it's time to buy.

However, for now the primary trend appears to be down and still consolidating and with the turmoil in the international monetary system and our large sovereign debt, you would have to think seriously about not buying right now.

Click to enlarge

Click to enlarge

in New Zealand dollars: $2056.49 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $37.83 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)

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