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Kiwi Houses Too Pricey? Or Has Someone Been Fudging The Maths?

Tuesday, August 28, 2012

New Zealand Houses Are Overpriced

Figures published by The Economist this month suggest that New Zealand house prices are grossly overpriced.  Basing its claims on a comparison between local property prices and rental prices, The Economist concluded that Kiwi homes are 66% over valued, second only to Canada (at 77%).  
Unsurprisingly, this figure has set off a flurry of media commentaries on the state of our housing affairs and its inherent implication for the economy at large.  Commentators are nervous.  Bernard Hickey believes that higher house prices can set off a domino effect that can only result in the stifling of this country's productivity and entrepreneurial dynamism.  Naturally, when Bernard gets nervous, so do a lot of people. 

Are Kiwi Houses Really Spiralling Out Of Control?

Stop.  Before you hit the panic button, let us find out if there is anything to panic about.

The New Zealand Property Investors' Federation (NZPIF) says "No"  In a media statement released just today, Andrew King, NZPIF President says that, "The conclusion that the magazine came to is wrong.  It is not that house prices are too high, it is more that rental prices in New Zealand are too low."

By comparing property prices to rent prices, The Economist rests critically on the assumption that rent levels in New Zealand are as they should be.  It has been the NZPIF's position that they are not.  In fact, the national property investors' body considers rental prices to be lower than they ought. 

After carrying out its own studies, the NZPIF further concludes that "it currently costs $4,284 more to own the average New Zealand house than it does to rent it.  This does not take into account the $72,000 deposit required to buy the house or that mortgage interest rate costs are at their lowest point for many years, making home ownership that much more accessible."

We are keen to hear from buyers who are now in the property market looking to purchase.  What has your experience been so far?  Are Kiwi houses really overprices or is it all a storm in a teacup?  Leave a comment below.

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The Tenancy Practice Service and TPS Credit Control work closely with the Auckland Property Investors' Association. Our vision of bringing helpful resources, documents and high quality services to Auckland Property Investors and Property Managers is shared by APIA, so its a partnership that works well. 

The Auckland Property Investors' Association is a great organisation for those who want access to advice and information from a range of industry experts and partners. 

Mathieu Holt- Managing Director, The Tenancy Practice Service & TPS Credit Control
Through the Association I found the channels and methods to fund the purchase of property I never dreamed about. Grant Brown

All round it has been one of those things Neil and I felt was really worthwhile belonging to. We have learned so much it has just built our confidence in what we are doing.

Janice Bieleski
I read two articles in the monthly magazine that saved me over $5,000. That is my membership fee for the next 26 years and I am sure I will learn a whole lot more! John Duncan
Fantastic organisation. The networking opportunities are brilliant and provide us with information and opportunities that cannot be obtained anywhere else. We learn something new at every meeting and we've been in this game for nearly 20 years. Pauline and Gyanen Kumar

I find the information obtained from various APIA meetings very useful in guiding my own property investment and rental management.  I also enjoy the networking opportunities with like-minded investors.  I am inspired by other investors’ success and find the more experiences and knowledge that I share with others, the more confident I become.  

Thanks to all APIA event organizers and administrators for your brilliant work. 

Stella Shao

I like talking to people and learning from their experience because it gives me the confidence to invest well. I think it is a knowledge thing. I now know I am doing things the right way.

Stephen Weatherall

My APIA membership has become a total success.

Every time I attend a monthly or regional meeting I come away with so many useful and positive tips that have added value to my property investments and management.

Not only that, the website is a great place for practical advice and useful information. It has now evolved into an important resource for my business.

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