Tuesday, July 10, 2012

House Prices in New Zealand v Gold - June, 2012

The statistics are in for the housing market here in New Zealand for June.

As placed against gold ounces, house prices are showing a slight uptick in value. Now back to 59.42% from the highs of May, 2005.

Down from 61.97% in May, 2012
Auckland houses prices showing a 16 ounces of gold rise in value in June

NZ houses prices showing a 8 ounces of gold rise in value in June

So what do we make of this? After giving Olly Newland a bit of a serve a week ago, it seems even he has grown a cautious leg on this. He can see a bit of froth and bubble, but it's too early to tell. If I interpret him correctly, it means that when the unsustainable prices occuring at the the top end of the Auckland market start to fail, then get out of the way, a crash is coming.

Also, don't forget the major uptick in mortgagee sales last month. Add to this the dynamics of the global Financial Crisis and the sure-fire effects on New Zealand, namely, higher unemployment, then now is still the time to sit and preserve your wealth and be ready for the opportunities that may come.

As an aside, gold may have suffered from a bit of 'high net worth' liquidation. This occurs when individuals, who have significant holdings in gold (usually to provide collateral for bank funding), need to liquidate gold and use the cash to settle other investments they may need to opt out of.

Conclusions. According to Nouriel Roubini, the perfect storm will happen early next year. Debt accumulation becoming untenable (think 7% rates for more than just Spain and Italy), China in a deflationary spiral and the US economy shrinking alarmingly coupled with their tax armageddon in January.

No need to worry, just be careful.

Gold in New Zealand dollars: $1992.59 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $34.32 per oz
Previous all-time high: $59.19 per oz (30 Apr, 2011)

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