Winter is here

Despite a flood of stories about the Real Estate market,  making it look like we are in a tornado of change, in reality not a lot has changed over the last 18 months.  At the beginning of the year, we predicted the market would slow in the second half of the year and average a 12% annual rise. We are well past the 12% annual rise and the market would have to go into reverse for this prediction to be true. 

So apart from underestimating the rise so far this year, by a wide margin, are we seeing any evidence of the market going into reverse anytime soon?


While we are seeing some traction from building companies it is still not enough to match supply. Most building companies cannot keep up with the demand and there are waiting list of over 12‐18 months or longer, to get a home built. New homes are beginning to catch up, but its still 10 years before supply meets demand.


Most if not all builders we talk to are lamenting the cost of buildingmaterials. The variety of materials has dropped considerably due to shipping issues and the costs have risen fast. In the last newsletter (Feb 2021) we wrote this:

  • Building costs are going up fast. In 2016 the average cost to build in NZ was $1906 per m2 with many variances depending on size, quality, and location. In 2020 that had risen to $2238 and will be higher today. ( We are now nearly twice the cost to build the same house than our Australian cousins who are paying around $1,190 per M2. (Michael Yardney Property Update). Get your kids to get a trade if they are looking to be wealthy in NZ.

While statistical figures are not available most builders would be looking at around $3,000 per meter for a key ready home now. That means a 160 m2 house is going to cost $480,000 to build. Add a $350,000 section to that and you have a modest new home costing $830,000. While new build costs are rising rapidly there is no chance existing established homes will not follow suit.


The population of Whangarei is increasing rapidly. The last figures out of the WDC were suggesting a 2.5% increase this year. This is most likely conservative today. Based on a wider population of around 90,000 that is 2,250 new residents a year. With an average family size of 2.2 people per household (Census 2018) that is 1,022 new homes required a year. Based on an average section size of 600m2 plus 20% for roading and services that means we require 73 Hectares of new land every year. To put that into perspective that’s a land area ¼ the size of Onerahi every year just to keep up with new demand. (Excludes airport). 

Are we seeing this sort of housing growth yet! No, but it is starting to catch up.


Houses are a commodity just like any other, effected by supply and demand. If a market gets too over‐ heated then people get scared that they will pay too much, stop buying, and wait for it to come down before buying. It certainly appears to me that the market is overheated right now. It started just after Covid and has accelerated since. So, I would not be surprised to see the market stall for a period of 12‐24 months. Personally, I think it would be a good thing. 

But on the contrary, if we also have faith in the historically proven statistic that house prices double every 10 years, then by 2032 the average house price in Whangarei will have hit $1.3 million. To get there, prices need to rise by $52,000 a year. And that is not far off what they have been doing.


Normally this would be a real threat, but there is little left in the Government interference arsenal. They have fired all but two bullets in their six‐shot revolver, (one being Capital Gains tax) and they kind of shot that one anyway when they lifted the Brightline test to 10 years, so its stuck halfway down the barrel. 

The last bullet is interest rates.


There has been a sensationalist headlines recently predicting that interest rates will rise by the end of this year. I prefer to believe what the Reserve Bank says . as they are the ones who will do the lifting , and they are saying they could start to rise toward the end of 2022. Interest rises can and will influence house prices. They always have and always will. When the cost of servicing housing debt gets too high then we as a nation get into trouble. Firstly, the individuals involved and then their banks. High interest rates will not be a good thing for our economy and the Reserve Bank is very unlikely to allow them to be used as a Housing sledgehammer, as they have in the past. 

The concept of rising interest rates will slow the market to a degree, but for Interest rates to have a significant effect they would have to rise above 4‐5% and that appears unlikely at this stage. 

What we will see is the amount people can borrow, (based on their income), drop. Banks are already factoring in a rise in interest rates into their current lending criteria, so we should not see any shocks. It is more likely there will be a pause as people save more to close the gap between the purchase price and what they can borrow. 

The threat of rising interest is the one significant change in the future scenario and very likely to occur.


We are seeing a curious trend in the rental department where average rents appear to be dropping from  $500 pw in May to around $465 pw at the end of June. But before you panic, or celebrate, depending on your views about rents, we have seen this before. Its almost a winter chill effect. It was a regular occurrence in my Housing New Zealand days. When the power bills start to rise for winter (shorter days and colder weather means more power usage) then those that are genuinely struggling often opt to cohabitate with someone else. Either people share a house or people move back in with family for a while. Its invariably the most financially vulnerable and therefore logically the lower end of the rental market. You get more turnover of the cheaper rentals and therefore an average rental yield that looks like it is dropping. It usually stalls by Mid August  and is rising again by September. 

Contrary to this drop Jane Pitman, our business development manager, is fielding calls from prospective tenants looking to pay in the $600 and $700’s. She recently let a property at $750pw and currently has four qualified professionals looking in this price range right now. If you have a property that you think could suit, call her on 021892443.


I was in Reefton pursuing visible  flakes of gold in a tea coloured river in the pouring rain a few weeks ago. Reefton is in the middle of gold and  coal country of the South Island. Driving back late one drizzling  evening I saw a train being loaded with black coal, wet and glistening under the halogen loading lights. 

Later that night I met some friends and I dropped into the Wilson Hotel for a meal. What a magnificent meal. I had the biggest chunk of succulent and delicious Pork belly on mashed potatoes and roasted vegetables you ever saw, and my friends dined on fresh caught blue cod. We talked to the publican who is a character in himself and some of the locals, most of whom are actively involved in coal mining. One, a delightful 70‐year‐old, was fully employed at his ripe old age, as either a 50‐ or 70‐ton digger driver.

The conversation drifted to the old‐time gold miners and their skills at getting the gold out of the hills. The digger driver casually mentioned that it was a good thing the old timers did not have access to the type of machinery he drove. When asked why? he replied “The Southern Alps would be flatter than a football field. “ The conversation drifted back to coal and the Publican produced a silver looking rock he had on a shelf behind the bar. It turned out to be a manmade, exceptionally light metal, called Silicon Steel. He explained that Silicon Steel was the one reason coal mining can never stop. It is made by fusing coal and silica together to form a rust resistant, lightweight, anti‐magnetic product that is used extensively in the electrical motor field and the medical industry.He also explained that the coal we had seen earlier that day, was heading to Lyttleton where it would be shipped overseas. Sadly, these fine and uniquely New Zealand characters were just a little bitter about how their livelihood is treated in this country.

 Which brings me to the point of this article. Did you know that New Zealand is currently importing over 1 million tons of coal a year to run the Huntly Power Station, and the Glenbrook Steel Refinery? Apparently, it comes from Kalimantan coal fields of Indonesia. Why? 

The Huntly power station was built to run on coal from the Huntly coal fields and gas from the Taranaki Gas fields. It is owned by Genesis Energy, produces 12% of New Zealand’s electricity supply and is used more as a back‐up system when the Hydro Dams are low, as they are now. 

The station was due to be fully converted to Gas, but then the gas supplies began to run out. It was then supposed to be closed in 2018, but then the water supplies began to run out. Its mothballing had been extended to 2022 and then again to 2025. So, a dirty CO2 coal fired atmosphere polluting monster, we have. 

But get this. The station uses about 2 million tons of coal a year. Up to 1 million tons of coal is shipped from Indonesia, unloaded in Auckland or Tauranga, and trucked to the Rotowaro Coal mine in Huntly, where it is blended with the local NZ coal, put on a conveyor system, and delivered via conveyor to the Huntly Power Station. 

I am sure this all makes perfect economic sense, and I get that there are times when we need back up power, but to a simple person like me, and the fine coal miners of Reefton, how can importing coal make any sort of sense, environmental or otherwise. Instead of using our own plentiful supplies of the CO2 emitting fuel, that are within 10 kilometers of the power station, we are importing coal from 9,508 sea kilometers away, adding huge transport and pollution costs to the product. Maybe I’m being dumb and Indonesian Coal is a special green coal that adds oxygen to the air when burnt.


The Quarterly Employment Survey December 2020 has the average New Zealander earning $1289 per week. Tax calculated on that figure is $252 pw. (NZ Tax Calculator) 

Therefore every time you casually hear of another million dollars being given away or allocated to something or other and think that Is only a million dollars, keep in mind that the hard working average New Zealander has to work and pay tax for 76 years just to cover it and maybe it’s your turn next.


You will all have received first a generic email from Harcourts, followed by a very embarrassed apology from me. And embarrassed I was. Apparently, I missed an email that said all Harcourts database people would be added to a follow up system called ‘Active Pipe”, unless I specifically asked for them to be excluded. (You have been now). So, the mistake is on me, as I should read every email that comes into my inbox, especially ones with the heading “IMPORTANT”, but quite frankly I do not as most of them have nothing to do with me and everything seems to have important as a heading and I think I should decide what is important to me. 

I must say the responses to the apology were simply humbling and magnificent. Both Diana and I really felt your forgiveness, support, encouragement, and reinforcement of the integrity of our relationship. 

We started this newsletter in 2014 when we were looking for a way to use our collective 70 years of Real Estate knowledge to help others. We followed it with the Facebook posting and the Blog “Real Estate with Barry Joblin”. (If you ever need to look at old newsletters go to this page as all issues are in the archives). It was something where we felt we could add value to our relationship by sharing both our knowledge and our Real estate instincts with you and we hope you have received value from them. 

While not necessary, we would hope that should you sell, you will contact us first, but also understand that people choose an agent for a variety of reasons.

Email me if you have anyone that wants to be on my database and who will be interesting in receiving this newsletter on a monthly or go to  My blog


  • A  Discussion on the New Housing Changes and The Effect on our Property Predictions. 


The pressing question on everyones mind is the impact of the new legislation on house prices, with the key changes being the lift in the Brightline period from 5 years to 10  years and the change to ones ability to claim interest paid as an expense.

The lift in the Brightline test was almost an inevitability and one signaled in the last newsletter. It was just too easy to do and then blame it on the previous Government. Grant Robinson must kick himself that he is recorded as saying he would not do exactly what he did do, just last year. He must be glad that he did not hold up a piece of paper with the word “No” on it like Winston.

The second aspect is the inability to claim interest expenses against the income received. This is creating quite a stir, principally because it will be the first time you cannot claim legitimate business expenses against income. It is fraught with difficulties and I would not be surprised to see a partial back- track before long. Most people know when a tax is fair and when it is not, and this one is unfair and will create a real headache for future tax assessment. 

 The legislation has not been drafted yet and the devil will be in the detail. The government is going to have to include “no interest’ on all residential property or people will simply move their property holdings to company ownership. If they do make it all residential property how are they going to assess:- 

* Property developers and building companies who buy a property for subdivision that has an existing house on it? 

* How will they assess a residential  house that is on  commercial land. 

* How will they assess the numerous businesses that operate out of residential houses? 

* How will they assess part usage, where part of a house is used for  residential purposes and part for business purposes?  

* If the legislation specifically excludes businesses, then what is to  stop property investors from setting up a company and buying through it.

* If you sell before 10 years and come under the Brightline test are you going to be able to claim your interest component off your profit. 

* If the answer is yes then people will accumulate their interest component for the number of years they own the property and claim it off the profit.

* If the answer is no, then investors will be effectively paying a double tax. Once by not being able to claim the expense and twice by not being able to deduct it from profit.  

Some years ago it was popular to set up a company to buy and own rental properties. This fell out of favour as there was little advantage in buying through a company. But the new rules will change this and the details of this change will demonstrate it as unworkable, as it changes a key aspect of business Tax law. Expenses are deductible. The Butterfly effect of this change will be huge and overly complicate a tax system that various governments have spent  20  years trying to simplify. 

One key advantage in buying through a company is GST. When purchasing you can claim the GST portion back from the purchase. 15% of your purchase price. You must pay GST on your sale, but you have the use of the GST money from day one.

One interesting and amusing question is how the Government is planning on handling the interest component of by far the largest borrower for residential property in the country.  Kainga Ora owned by themselves. Another 2 billion allocated in this legislation for further borrowings. You can bet that they will exclude themselves from this legislation, which will fan the fires of unfairness.

Just a quick note about this type of Government exemption. Over two years ago now, the Government found out that the guidelines for Meths in homes were wrong and they decided to change the standard to from 1.5 μg/100 cm2 to 15 μg/100 cm2. The government changed the criteria to their own state houses to 15 μg/100 cm2 immediately. However, the 1.5 μg/100 cm2 remains on the legislative books unchanged and all tenancy managers and landlords still have a 1.5 μg/100 cm2 level in their legislation. Some banks therefore still apply it for lending purposes. It is very frustrating when the actual written legislation does not catch up with the known safety standards. If you own a house with a meth reading of over 1.5 μg/100 cm2 you are legally obliged to clean it for your tenant, yet the Government can house that same tenant with a reading of 15 μg/100 cm2.

The removal of interest payments claim-backs is going to be an ongoing thorn in the Governments side.  Apart from the inherent unfairness of not being able to claim a legitimate expense, and apart from it being a retrospective tax in that it applies to existing properties with no lead in period, this will make a lot of properties unaffordable to the owners, who often have simply tried to set themselves up for the future. Some will have no choice but to sell and then they fall into the perfect trap set by the government. We ( The Government )  put you in a position where you must change your long-term plans and sell your property now. Then we have extended the tax net so we tax you as you fall.  It reminds me of the Crow and Blackfoot Indians of the USA, who had “Pishkins” where they drove the Buffalo herds over a cliff, thus harvesting a massive amount of meat, but having no idea of conserving animals for future generations. For the slow amongst you: – the Indians are the Government, the buffalo the landlords and the bottom of the cliff is the Tax department whose job it is to be fair!

The Sacred Cow that Just Won’t Lie Down!

The fundamental problem is that we do not have enough houses in the country. The old supply and demand issue raises its ugly head again  and again, and until it is truly addressed, it will come back time and time again to haunt any government. For proof of this we only need to look at Canterbury. The only province in New Zealand without rapidly rising house prices. (Until last month) Why? Because they had two massive earthquakes that damaged most of the city. They had to rush through special legislation to allow them to shortcut the RMA and  create vast tracts of new land for building, and then they had to build new homes on a massive scale. The consequence is that enough homes are being built for the demand, thus the prices are not going up to the same level as the rest of the country.

No amount of juggling the chairs on the Titanic’s’ deck is going to fix the supply problem. We will not see an end to the housing crisis until we have enough houses, and we are 10-15 years short of that. The recent timber supply issues being signaled by Carter Holt, show how complicated this issue is. Pull one string and a dozen objects move. Stopping the investor buyers will not address the shortage of houses. Other groups will quickly take up the slack. In Christchurch the massive, organized building program equaled the  lowest capital gains in the country. Lesson learnt!! . The average price in Christchurch (New Zealand’s third largest city) is $556,446 now similar to Whangarei’s with less than a quarter of the population.

The problem has been created by successive governments failing to address the supply issue adequately and urgently. Combine this with the incredibly open migration policies, and the current housing situation was inevitable and has been signaled and discussed for over  20 years now. We simply do not build enough new homes.

The latest rule changes are designed to partially exclude new builds, in the hope that this will drive people to new homes. It is a great idea but misses the point. There are not enough new homes being built. Look at any building company based in Whangarei and they are swamped with demand. They have more buyers than they could build homes for. Most building companies and independent builders are booked up 12-24 months ahead, What they do not have is the land to build on and the crews and subbies to build them, nor, it now appears, the basic raw materials to build with. You can throw feathers at a sacred cow, but you are not going to turn it  a homing pigeon.


I listened to the minister of Finance argue that rents would not go up through his new legislation, because tenants would leave those rental properties and move to cheaper ones where the rent had not gone up. This again shows a lack of appreciation of what is happening. There is a chronic shortage of rental properties and this will get worse as the Government continues to drive people away from being landlords. There are simply no houses for these tenants to move to.

Presumably, the government intends to build lots more rental properties, with all the money they are going to borrow, (and claim the interest expenses), however this will take 20-40 years. Surely it makes more sense to wait until you have at least made a significant dent in public rental supply and demand before shooting the golden landlord goose in the head.

I note Tony Alexanders’ comments in his latest newsletter. ” Data from MBIE tell us that since Labour were elected in September 2017 average rents throughout New Zealand have risen by 24%. In contrast, average incomes have risen by about 11%. The rise in rents we can largely put down to the government increasing the cost of rental accommodation.” 

I wrote the below article in 3/3/2019. Its 2 years old, and allowing for more properties to have been added to both the private and Government owned list, I am sure the ratios will be more of less the same;

What a sad day it would be if the Government and the Reserve Bank ever succeeded in driving the private landlords out of the rental market. Some simple facts.

  • 450,000 households rent (Census figures 2013)
  • Housing NZ own 62,000 rental homes (this figure is gathered by stealth as they seem to fudge their actual ownership by claiming properties, they lease off private landlords)
  • That means 388,000 rental properties are owned by private landlords.
  • That is 6 out of every 7 rentals provided by private landlords. 
  • If the private landlords all got out, you would presume it would be the governments job to provide the missing rental housing.
  • At an average cost of $500,000 each the Government ( i.e. you the taxpayer) would need to stump up with 194 billion dollars to replace them.
  • Or $53,000  in extra tax for every one of the 3.64 million people who pay tax in NZ.
  • To put that in perspective the Christchurch earthquake rebuild has cost around 40 billion so far.

The logical conclusion is …we need the private landlords,  so stop beating up on them. 


The Brightline test was brought in under the John Key government to stop house flipping. ( where someone purchased a property, held it for a few weeks or months and then sold it at a profit). Two years was ample to achieve this purpose. It was then extended to 5 years under the current government, and at this point the purpose changed from a flip prevention to a capital gains tax. The new 10-year extension to 10 years is dishonest in that we were promised no capital gains tax by both the Prime Minister who said “Not on my watch “and the Finance Minister who simply said “No” to a question about if he would raise the Brightline Test. This is a capital gains tax and became one after the 5-year change when its purpose was no longer to stop people flipping properties.

The latest legislation will only affect a few investment buyers. Those that borrow heavily against the property they buy  or other property they own. The larger number of investment buyers we are seeing are the ones who are moving their capital out of bank deposits and putting them into housing. Basically, swapping their interest income to a rental income. These people are not going to worry about the lack of interest provision as they are cash and are not going to worry about the Brightline test as it taxes profit if they sell, when their purpose is to create an income stream now and in all likelihood will be the estates problem when they are gone. The profit is just a bonus they were not getting with their bank savings.

This legislation seems to have little purpose apart from collecting tax. There is no incentive for first home buyers, For example the cap rate. If a first home buyer buys a property under a set price (the cap rate) then the government will give them a grant of $5000 per person if it is an existing house and $10,000 if it is a new house. In Whangarei, the cap was at $500,000 before the new legislation and its at $500,000 after the new legislation. No difference. No wonder the first home buyers have been left underwhelmed!

It has been said by many people and I totally agree, this will push up rents. I deal with many landlords who deliberately charge a rent below market for several reasons. This legislation will force most of them to charge the highest they can get simply to survive as landlords. Any talk of it not pushing up interest rates, is just that… talk!

Landlords can only put the rent up on an annual basis now ( it was every 180 days) . This means landlords will charge the maximum they can get annually as they know that rental cant be changed for another 12 months.  

The government is not ready to take over from the private rental market. They desperately need the private landlords as they provide 6 out of every 7 rental properties. This move is way too soon and will backfire spectacularly, either pushing people to set up companies to go around it, or by selling, or by raising rental  rates.

I strongly believe that they will have no option but to reverse their stance on the interest rate option. Its just dumb, and they will see this before too long, especially as they get into the detail.

What effect on Whangarei Prices?

We will see more investment owners selling. Some have been waiting for the right time to sell and that will be now. Those that were thinking of selling and had owned the property for 6 or more years will wait out the 10 years if required to beat the Brightline test . The properties that do go on the market will get snapped up by the huge number of first home buyers. We will hardly see a blip on the available supply.

Investor buyers will exit the market for now to see what happens with prices.

We may see a pause in the market while the new changes sink in, but the fundamentals of supply and demand will eventually drive the market onwards. Until there are enough houses built, the housing crisis will remain, and we will have upward pressure on prices and our prediction of a 12% gain by the end of December looks good. 

Email me if you have anyone that wants to be on my database and who will be interesting in receiving this newsletter on a monthly basis. or go to  My blog


What are the Rising Pressures

  • House prices are getting uncomfortably high. During my 35 years in real estate, I have seen many boom cycles, where the market has surged ahead and then slowed for some time. I have seen very small drops of a few percentages in the bust cycle, but mostly the market has just slowed down.  The house prices doubling every 10 years formula has proven true over those 35 years and historically over 135 years in New Zealand. If we take the current average house price in Whangarei of $580,000 (REINZ) then in using this old formula the average will be $1,160,000 in 2031. For that to happen house prices have to have an average growth of $58,000 per annum. That is $1,115 per week. Take another look at the current growth rate of $1,230 per week and we are only just ahead of where we should be for this historical doubling in price.
  • Do I think it will happen?  No I don’t, but then I didn’t think it would happen 10 years ago, nor the 10 years before that.  Based on the available evidence today its on track to happen again.
  • This really is a supply and demand situation. All real estate Agents today are crying out for more listings. In the existing housing market there is a chronic shortage of stock. The eventual answer to our housing “crisis” is new builds. If and when new builds catch up with the supply shortfall, we will have supply and demand pressure drop. For that to happen developers have to break up more land. For that to happen with any sort of speed the Resource management act has to be thrown out. And this is where our current Government is currently at. Kudos to them for finally understanding that the RMA is at the heart of our ability to address the housing shortage and having the courage to do something about it.
  • Interest rates may rise. This will have an immediate impact on housing as it will scare a lot of people. But it would have to go up a long way to be a serious deterrent and that would be very bad for the economy. I think we may see one or two token rises to give the reserve Bank something to drop if the economy downturns, but it will be a token only. The USA did it 3 years ago and had to backtrack quickly when it built recessionary pressures.
  • Building costs may rise to the extent that the inflationary prices are in the new builds. We have already seen this with building costs rising from around $1,900 a meter in 2016 to over $2,200 a meter in just a few years.  If new builds become dearer than existing homes, then existing homes will rise in price also.

2021 the year of Surprises

  • I try to keep these newsletters factual, but the reality is both Diana and myself have developed a sixth sense in the property market and it’s kicking in this year. It may be a flashback  back to my increasing and frequently wrong scepticism that prices cant possibly  double over the next 10 years, but I have a very uneasy sense about the current market.
  • I think we will see some sort of stall later this year. There is no evidence for this belief, in fact based on the current evidence we are heading for a 20%plus growth year. But instinctively I think we are going to see something happen that will stall the market. The most likely scenario is political interference. There are a number of ways this could happen this year.
  • The Reserve Bank has already instituted loan to value restrictions on investment properties. They could increase these. 
  • Capital Gains Tax could be introduced. This would be a very unpopular move as the Labour party has ruled it out for now, but it may feel the circumstances warrant the change in policy. This would be a very bad look for a Government who mantra is trust, so I believe the most likely scenario will be the next option, Fiddle with the Brightline test. 
  • The Brightline test could be adjusted to remove or extend the 5 year get out of jail free period. This would mean any property that was not your residential home, would be treated as taxable income when you sold it. You would have to pay Tax on the capital gain as if it was part of your income. Removing the Brightline 5-year period and replacing it with a 10,15,30-year period will have a major effect on property prices. It would only require one word change from the current legislation and politically is a perfect solution for Labour. The legislation was introduced by National under John Key. It is old legislation, so labour can argue that they stuck to their word and never introduced a capital gains tax. It is incredibly simple to change.  Basically, they tweak an already current bit of legislation. This option makes so much sense that I have convinced myself that it will happen this year.
  • I recently worked with a client who has American citizenship. The USA has far reaching housing tax system. When this client sells their second NZ property, they will have to pay the US government tax on the profit, even though the property is in New Zealand. I asked how the US Government would know? and was told that the NZ government provides this information to the USA.
  • Interest rate rises. If these went above 5% then a lot of people would be in trouble based on the high loan amounts to purchase today. This is not in the Banks nor the Governments interest, so is an unlikely strategy.
  • Cheaper forms of housing. We are already seeing some cheaper construction methods being imported into NZ and imported kitset homes are on the rise. I have an A1 home and took an internal wall out. The timber framing was a very superior, slow grown pine, with “Made in Austria” stamped on every timber.  This won’t fix the cost of the land, which is rising all the time, but could put a ceiling on building cost rises.

The Quota Concept and House Prices

A friend of mine was heavily involved in a particular quota system. It was designed to allow the product to be sold for what the market thought it was worth. All bids were confidential, so the only price disclosed was the top bid. What this friend discussed was how often the top bid was disproportionally higher than the next bid. It was not just a bid above the others but often 30-40% above and reflected what value that buyer saw the product as worth, on that day for their reasons.

We have a similar thing happening in the housing market. It does not happen in Auctions where the top buyer knows exactly where the second buyer saw the value but is happening in pricing situations where the price is either fixed or when it is advertised as “Buyers over xxx should inspect”. In multiple offer situations, we are seeing a range of prices usually within a ballpark figure, but then there is usually one offer a lot higher than the others. Its usually from someone who has missed out on several properties and has decided that they will get this one. The buyer has deliberately paid over the expected market price to secure the property for themselves. Not a bad strategy in a rising market as the property will be worth their figure in a matter of weeks or months.

But what it does do is speed up rises in house prices.  This property then becomes the comparison agents and buyers use in the street for their future appraisals based on recent sales evidence.

As an Agent I recommend sellers use this marketing strategy, as my job is to get them the absolute best price the market will pay, however I can see that an Auction based marketing system is fairer for the general population as the price paid by the top bidder is dependent on the underbidders last bid.

A concept in Chaos Theory is called the ‘Butterfly Effect “and first suggested by Edward Lorenz.  It suggests that even small events can have profound downstream consequences. For instance: –  ‘A butterfly flapping its wings in Mexico can cause a tornado in China” . A simple example would be a drip of water falling into a full bathtub, could cause a small ripple that overflows the bath onto the floor, where it soaks through the flooring into the wiring in the room below, causing the light to short out, which blows the circuit breaker, which blows the power pole breaker, which faults and blows the district circuit fuse blowing out power to the district, etc …………. “

On the 12th of February, the new Tenancy rules came into effect. Amongst many changes is the requirement to give tenants 90 days’ notice to vacate rather than the current 42.  A small change you would think, but No! it is having an excessively big Butterfly effect.

42 days was 6 weeks. 90 days is 12 weeks. With an average rental in Whangarei of around $480 pw, that means a bad tenant choice could cost you $5,760 in lost rent, compared to $2,880. Any opportunity the bad tenant must damage the property goes from 6 weeks to 12 weeks.

The result is, a landlord or Agency cannot afford to make a mistake. Those tenants who might have been worth a risk (i.e., missed a few payments, or had a few noise complaints made about them) are not going to get a second chance. The criteria for selection just got a whole lot tougher and ANY black mark is going to put the prospective tenant out of selection. For most landlords this is a good thing, but for many tenants it is a bad thing as their teenage history and dubious credit rating will follow them.

Consider the impact this will have on the 20/1/21 Stuff article by Henry Cook. “Public Housing waitlist grows by 1000 in two months to new record high …… The waitlist for public housing has continued its steady march upwards with 22,409 eligible households waiting for a state or social home at the end of November”.

 The unintended consequence of the new legislation will be many people, with minor rental issues, being rejected at the selection process and they will become totally reliant on Government Housing. The growth in the Public Housing waitlist will be dramatic this year and swamp the effect of building new state houses.

In 1991 I moved to Whangarei and worked for what is now Housing New Zealand but was called the Housing Corporation of New Zealand back then. We had a points system where we allocated houses to tenants based on their current living conditions. The rougher their current living conditions the more points they got.  I noted a family that we had just housed, who had been living in an abandoned 6 aside herring bone milking shed.  I was in the area where they had lived and was curious to see the shed for myself. I stopped outside the building and it was clearly occupied by a young family. I spoke to them and they told me that their cousin had just moved out and that they had moved in. They had been living with their family but had moved into the milking shed as it would raise their points and help get them a state house. It was clear that the shed had become a commodity to be used to raise priority. I am guessing with the current waiting lists for state houses we are going to see a lot more of this.

When the government moved to introduce the accommodation supplement in 1993, they took the pressure off state housing by providing a top up amount to all qualifying tenants so they could apply for privately owned rentals. This latest change to the RTA, will go a long way to reverse the benefits of that move.

We are already seeing the consequences of this change today. The good tenants get the rentals. The poor tenants get first pick of the State Houses. The people in the middle, who have a “risk factor” against them are going to miss out. Keep in mind risk factor includes not having a past tenant history. This will affect first time renters like your kids or grandchildren. They will not get the private landlord homes and they do not qualify for the Government housing, so will have difficulty finding a home and may become the new class of homeless. The new tenants will not get the chance to prove themselves through no fault of their own and will move back in with you! 

In a few cases this will be their own fault. I can think of one example where a friend of mine privately let his property to as family who carried a few warning signs. The landlord was taken by the family’s story, the apparent good character of the bread winner and believed in them and wanted to give them a chance. Immediately upon occupation strange repairs were required, where toilets and showers started leaking, a dog was moved in, and the neighbours started complaining about noise and cars and the rent stopped being paid. After some difficulty, this tenant was moved on. Today that tenant won’t get another chance (yes I know they don’t deserve it),


2021 has got off to a rollicking start. House prices in Whangarei have been going up by an average of $1, 230 per week for the last year. So the question is “ Will this continue or are there some pressures building to change this. I think so!!
Interest rates
Let look at the historical reason for the current rises.·


Low interest rates. its cheap to borrow money and you get a better return from houses than from the bank.· Supply and demand. There is still a chronic shortage of housing. The supply issue in partly being addressed. Higher property prices mean marginal subdivisions are profitable again. Building permits are steadily increasing across the country, so we are finally beginning to close the gap between supply and demand, but we have a long way to go and it will be 10 years before we actually catch up.· Returning Kiwis are buying up properties. Many of these are in the county where they were born, so the provinces are doing well.· Qualified KiwiSaver buyers are in the market in ever increasing quantities.· Building costs are going up fast. In 2016 the average cost to build in NZ was $1906 per m2, with many variances depending on size, quality, and location. In 2020 that had risen to $2238 and will be higher today. ( We are now nearly twice the cost to build the same house than our Australian cousins who are paying around $1,190 per M2. (Michael Yardney Property Update ) . Get your kids to get a trade if they are looking to be wealthy in NZ

1. Small Business Funded By House Prices
2. House Prices In The Next Six Months 
3. House Prices Doubling Every 10 years ..
4. A Critique ! A Warning About The Auckland Market
5. Rental Market Headwinds ? 
6. Hunterwasser Tribute 
7. Wild Inflation Theory 
8. Electric Cars Parity with I.C.E.
9. Fusion Energy and the Future       

Welcome to the next edition of my mostly real-estate thoughts, facts and predictions for the future. The last letter was in July and as is becoming increasingly common it takes a few months for the dust to settle enough for me to get an idea where things are going in the property market. In the last issue I said that while logic told me that we had to be heading into a recession, we were seeing no sign of that in the markets, and that I though we would see the market stay flat of even rise for the rest of the year. Well half that prediction was wrong. It did not stay flat, but I was way ahead of every noted economist. 

Small Business Funded By House Prices. 

I managed to spend about 2 minutes walking alongside John Key, when he was Prime Minister, as he was heading from our conference for a rendezvous with a government BMW. I was desperate to get my message across that small businesses depended on house price inflation. He probably thought I was raving loony, as I garbled on about the link, that seemed so obvious to me, a business owner. He finished my monologue by saying “Small business needs rising house prices! I get it”. My teaching the then Prime Minister, who had a lengthy and distinguished career in the financial world to suck eggs, was done! 

So, let me walk with you for two minutes …. Rising house prices are essential for business growth, survival, and capital expenditure. Approximately 97 % of all businesses in NZ are small businesses and they employ around 30 % of the working population. (MBIE). Any small business owner will tell you that when they need money to:- start up, buy more stuff, get an overdraft, buy more stock , buy more machinery, expand , or just survive, that when they go to their bank for funding, they are going to get asked one overriding question. . “What’s your house worth?”. While the banks are interested in other aspects of your business, what they fall back on is the security you have in your house or houses. That is what they primarily lend you money on. They know that this is the only readily realisable security they can get. They also know it motivates the hell out of you to make sure your business succeeds. The more your house is worth, the more you can borrow. The more you can borrow the more you can grow your business. The link between house prices and funding for small businesses is cast in chains. The last thing the government, the banks, and small business owners want to see, is property prices declining. That would be the beginning of a really, really, big financial disaster. 

Which Segway’s into the Reserve Bank’s Chief Economist, Yuong Ha, saying the bank was not responsible for soaring house prices and cannot control them. “House prices are not something we can control, even though people put that on us”. And neither should they. Houses are a commodity and should be market driven by supply and demand. We do,  and will see government intervention in house prices, but imagine if the government made legislation that controlled other asset classes, like the share market prices or Gold prices. Imagine the uproar!

Where Are Prices Going In The Next Six Months 

The short answer is up and accelerating. 

There is way too much pressure from the multitude of buyers to see any other result. We are seeing multiple offers on properties similar to the peak three years ago. Open homes are full, and we have people making offers on property without seeing them. What we are seeing in the streets

  1.  First home buyers. As more and more young people build up a deposit in KiwiSaver, more and more of them have a deposit for a house and are they ever in the market. Any property that comes in their price range will get 20-40 people through the first open home and it is probably going to have a deal on it, within a week. KiwiSaver started 17 years ago and after three years people qualify to remove some money for a deposit. That means we have 14 years of qualified first home buyers entered or entering the market. These people are pushing the investors out of this section of the market as they pay more than the value the investor sees. A negative side effect is that the first home buyers are moving out of rentals and widening the gap between desirable tenants and less desirable, meaning the overall quality of tenants is declining.
  2.  Money fleeing the banks. We are seeing more and more purchases where the buyer is pulling their cash out of a bank and putting it into a property. These people are often buying the one- and two-bedroom smaller properties that do not suit the first home buyer. Most of these people are older and have the cash, so we are not seeing many sales subject to finance
  3.  People relocating from the main centers. There seems to be a huge amount of movement from the bigger cities to places like Whangarei. These people are often cashed up, as they are selling more expensive homes. I mention the cash element, current Bank strategy of limiting Loan to Value Ratio’s is only going to hurt the first home buyers and not the second two groups.
  4. With the current pressure on the available stock and with interest rates predicted to remain low or go even lower, there is no reason to believe we are going to see a slowdown in the market for the next 6 months, at least, and I suspect it for 12 months . Again, logic says that we must have an impact from the Covid recession, but every prediction of when that was going to happen has so far been proven wrong. We are through the end of July crash, when the subsidies would stop and kill the market, and through September crash when the impact of the subsidies stopping would be felt. The only predictions still standing are the ones saying next year when the impact of the subsidies stopping is going to be really felt. I’d hate to be the emperor standing naked in my new clothes but remember this Covid induced recession is not like any other recession and all the usual rules do not seem to apply. The recently released unemployment figure of 5.3% demonstrates that the predicted mass unemployment simply is not happening. We have had way worse unemployment rates even in good years. When you take out the 4% totally unemployable the real rate of active job seekers is exceptionally low, with some industries crying out for workers. The Government tax take is nowhere near as bad as predicted so again, bad news predictions proving wrong.  The reality is we are being told things are way worse than they are proving to be.

We may not see the calamitous and dire future predictions that we have been foretold occurring. We do not seem to have died from lack of tourists. 10 billion of the money that was spent on overseas holidays is now being spent on NZ holidays. I thoroughly enjoyed my latest camper holiday, where the first thing you noticed was the different attitude of the camper staff to their own people, and the second you noticed was that everyone pulls over to let cars get past. You don’t see the big lines of cars following slow campers. The pickup and drop off terminals were very busy. There were plenty of campers on the roads and the holiday parks were full.In Reefton, Diana and I dropped into “Dawson’s Bar and Dining” looking to talk to a local about the town. I asked the extremely helpful bar lady to point out a local to me. Her finger waivered in the air as she used it as pointer to scan left and right over the 30-40 diners and drinkers, before finally with a sense of triumph, identifying one couple and a single manic looking gentleman. 3 locals out of 30-40 people. The point being NZers are out and about seeing their own country and spending much of the 20 billion they would have spent overseas this year in good old NZ.But for me the biggest bonus of all was the lack of social media posts of annoying family and friends basking in some exotic overseas location, while I was hard at work suffering the rain and cold. 

The fundamentals of low interest rates, a shortage of houses and a growing population are still in play and have been for the last 15 years. Basically, until the supply catches up, the demand will drive prices up. (See Something to watch in Auckland)

“Do House Prices Really Double Every 10 years” by Mark Lister. Craigs’ Investment Partners 

An interesting headline that always captures my eye, as these articles are invariable written by someone with a barrow to push. Mark starts off his article saying he is no property hater and recommends young people getting on the property ladder. Craigs are predominantly a share broking and investment firm and property investment takes money away from firms like this.

 In this article he quotes Reserve bank data from 1962. He writes “that at first glance, the numbers are good. New Zealand House prices have increased 8.2% per annum over that 58-year period, so they’ve in fact doubled every nine years”. He ends his article saying that “It’s also based on some periods in our history when inflation was exceptionally high, this makes the rule of thumb much less useful, and potentially a little less accurate” 

And this is the argument all these writers follow, like a well-worn Wildebeest game trail into the Great Green Greasy Crocodile infested Limpopo river. They try to claim that this increase is not truly representative of true growth, because we have inflation and gross domestic product and these events  must be taken off housing growth. Mark  also talks about how mortgage rates have fallen and made housing more affordable, thus distorting the increases.

He mentions that the biggest rises have occurred in times of high inflation and therefore are biased  increases And the answer is “Of course!! That’s the exact point and that’s why people invest in property and that why the rule of thumb of doubling every 10 years is accurate”. Do not complicate it Mark. Your article clearly shows that despite fluctuations in interest rates, despite how well the gross domestic product is doing or not doing , despite economic slowdowns and rises, despite high interest rates and low interest rates, despite plagues of locusts and corona viruses, property does on average double in value every 10 years , (or nine years in the last 58 as your research shows.) This does not just go back to 1962, but back to when property records began. 130 years in NZ and Australia and 900 years in England (the Domesday Book)

Something To Watch In The Auckland Property Market. 

Auckland looks like it is making inroads into its severe housing shortage. Previously this figure has been estimated at around 40,000 by noted economists like Tony Alexander, however a new report from the Auckland Council Chief Economist David Norman has the current shortfall at around 15,000 homes. This in part will reflect the intensive building programme in Auckland, but also by the slowdown and shift in immigration trends. While net immigration  figures are up on last year (79,400 this year as opposed to 52,300 last.) The people coming into NZ now are predominantly returning New Zealanders, and with our borders closed we are not seeing the number of non-NZ migrants to the country. The New Zealanders differ from the more typical overseas migrants as they head back to their areas of origin, rather than piling into Auckland as the non- Kiwis have done in the past. Along with the baby boomer retirement drift out of Auckland for financial and lifestyle reasons, we could see the pressure on Auckland house prices slow down or even stop. The result will be a stagnation of prices in this area. It is 3- 5 years away, but we may be seeing the beginning of the trend now. It looks like we will have a Covid vaccine before then ,and it will be interesting to see how open our borders are to overseas persons after this scare. You can be sure there will be more pandemics coming and some of them will be deadlier. You can also be sure New Zealand will be an even more attractive destination to people overseas, with our ability and willingness to close the borders in times of crisis. Just how open our borders are will decide the future growth in the Auckland market.

Rental Market Signs. 

We are seeing an unusual set of statistics in the rental market. We have previously talked about price glass ceilings for rents. $400 per week was one of these I talked about in 2018, but that ceiling is well and truly shattered. Rents are going up fast at present with an average increase of $7 in the last month and average rents are closing in on the next ceiling which will be $500 per week. There are some potential signals that all is not as good as it seems. The days a property is vacant has increased to 26.5 days. Correspondingly we are seeing both enquiries and applications down on previous months. There are a lot of potential reasons for this, including the approach of Christmas, but one suggestion is that people are not prepared to pay the rents being asked. We will watch this closely as we know there is a chronic shortage of rental properties and we went through something remarkably similar when average rents approached $400. For the first time in my memory , it is usually cheaper to own a home than to rent it. 

Hunterwasser Nears Completion. 

Never has a building in Whangarei been so mired in conflict and so polarizing in opinion. You would this it was  another Trump Tower. The process to fund it followed a very convoluted and twisted path, and looking back on it there were obvious signs of “clever manipulation “ of the public, including creating a referendum that split the “No” vote in half and despite assurance to the contrary,  it will undoubtedly be an ongoing cost to the cities ratepayers for many years to come. 

However, that said, as this magnificent structure slowly and sensuously strips from its bridal white robes, revealing tantalizing glimpses of gleaming multi coloured tiles and soft  seductive  and sweeping curves, even the staunchest critic must be impressed. We are seeing a masterpiece being created. 

For 100’s of years after the controversial process has been forgotten, this unique building will become a symbol of Whangarei and its future. It will make national headlines as it becomes the Ohakune Carrot or the Paeroa L&P bottle of Whangarei. It will spread across the world in people’s selfie photographs and will put Whangarei firmly on the map. 

Congratulations to the many who fought so hard for this building for over 12 years.  Who had the vision to see what many (including me) could not see. You will be remembered in future generations as some of the current day founders of our city . 


Inflation Theory A’la Barry 

Here is a strange theory I have been working on. In July I mentioned that when you print money you make that money worth less, because there is more of it, and the things it buys worth more. Classic inflation theory.  Historically when money gets created through “Quantitative easing “inflation gets going. But this is not happening yet. Japan has been deliberately printing money for about 5 years to try to get inflation moving, and so far, it has fallen as flat as a  rice cracker! 

So, what if we were in fact getting the inflation that quantitative easing creates, but it was only showing up in certain areas. Imagine that brick pavement you walk on in most city centers. The ones with brick sized pavers and lots of cracks between. As those bricks push down into the sand underlay you get sand rising through the cracks and settling in the grooves. If we look at the sand as the things that are going up in price like houses, shares, and gold. The bricks represent the things that are not going up in price, like cars, TV’s, and toasters. These things cannot go up because there are so many of them and if the manufacturer put the prices up, you would buy a different one, or hold off buying one for a while. Technology and mass production are constantly driving the prices of these items down so holding off can save you money. So, let us say there is inflation occurring,  but its only in selected areas like property and shares. They are the cracks in the pavement.  When we look at property it is deliberately excluded from the inflation index, as is the share market. So what we are seeing as a rising market could in fact be inflation happening, but not across the board as has previously been recorded, but specifically in property.  

As I write this it seems a bit far-fetched, but I am leaving it in the newsletter for those with greater knowledge to comment. I would also point out that this  ties in with the K shaped recovery we are told about, where the recovery is very uneven and favours certain sectors over others, such as medicine over travel.

Electric Car Prices Due to Hit Parity Next Year. 

Just putting this prediction out there again. New electric vehicle costs are predicted to reach parity with internal combustion engine vehicles next year. If you are in the market for a new car then you should watch this closely, as once this happens, internal combustion cars are going to be hard to sell on the second-hand market. Initially the cheaper vehicles will come out of China and India, but once started the rest of the car companies will follow suit.

New Renewable and Radioactive- Free Power Source Possibility 

We are all aware of the nuclear fission energy source. That is the classic atomic reactor that splits up very heavy atoms like Plutonium or Uranium and captures the energy released to create electricity. The problem being that pesky by-product radiation. 

A British company based in Oxfordshire has switched on a new type of power source ( Tokamak Fusion Reactor) where they fuse two lighter elements together and harness the energy, so instead of splitting a heavy atom they fuse two light atoms together in a process called nuclear fusion, as opposed to nuclear fission . The process attempts to create the same type of energy the Sun creates with its hydrogen and helium mass. So, providing they do not turn us into a mini sun ourselves,  (it is switched on so that minor setback has passed), the new type of energy source could create unlimited power with zero radioactive by- products. 

This will revolutionise power as we know it, with cheap , efficient and green energy for Cities, Houses and vehicles. 

While researching this article I looked up the “ NZ Nuclear Free Zone Act 1987 “ to see if we would be allowed to use Nuclear Fusion, and guess what, this much quoted act only stops nuclear powered warships, weapons and craft. The act allows the building and using of Nuclear Power. You could knock me over with a radioactive feather!!(Thanks Rupert Morrish for putting me right on Fission and Fusion )

Optimize Realty ltd Licensed Agent reaa 2008
Barry Joblin areinz licensed agent reaa 2008

Why Me?

Some years ago, I was standing in front of this famous Van Gogh Painting “Stary Night”. (It is in the Rijksmuseum in Amsterdam).  I remember standing amongst a crowd of other people and being totally under its strange and fascinating spell. I remember thinking “that’s so simple I could paint that!”. Years later I tried, and tried, and tried, and although some of my work was passable, I could never capture the movement, colour, and mood his painting drew from me.  (Incidentally, the view is from his asylum window, so he was quite mad at the time.) 

And strangely this relates to Real Estate sales.  If you asked me today   “Why would I use you , what can you do for me that I cannot do for myself?” or What makes you different from any other agent? I would have difficulty answering.  I could give you all the standard marketing, knowledge and negotiating answers, but that is not really any different from what anyone else would say.  What I have is 35 years of Real Estate sales experience and that has built a set of skills and a special kind of instinct.

  1. It is not what I do, so much as when I do it.  
  2. It is not closing the sale but knowing when and how to close it to your advantage.
  3. It is not simply negotiating the price, but knowing how to read the other party, so that I know what their top dollar is before they know.  
  4. It is not simply marketing your property through the various mediums but knowing how to target the right buyers and how to enhance and showcase your home’s special features and benefits. 
  5. It is not simply getting an offer on your property, but how to add value and desire to your home so that you get the best market price.
  6. It is not about just knowing the market today but being able to guide you through what is going to happen tomorrow.  

Based on my extensive experience I have a proven track record of getting the best price, far in excess of the fees you pay.. 

So call me if you are thinking of selling your property.

Your February 2020 Newsletter

Where the market is going in 2020.

The main reason this newsletter is a bit overdue is because I have been carefully watching what is happening in the news and comparing that with what is happening in our office. It will be no surprise that my personal predictions will follow just about everyone elses  and  that’s it’s heading back up again. However  this has taken quite some time to materialise. The media predictions were rampant at the end of last year, but at a local level it wasn’t happening. We were still seeing the lower end of the market active, but the higher priced properties were selling slowly. However, this year we are seeing a large numbers of Auckland buyers moving back into the market. My personal enquiry has shifted from predominantly locals to predominantly Aucklanders. We have multiple offers on many properties with a new company record of 10 on the same property.
Last year we saw a two-tier market, where properties under $500,000 raced ahead whereas properties over $600,000 were selling slower. This created a distortion as the lower priced properties were gaining on the higher half and the price gap between them closed. Logic would say that with the new interest in the dearer houses we should see a period of adjustment where these properties re-establish their price difference.

2020’predictions are: –

Continued strong interest in properties up to $500,000 from the first home buyers and the investors. This market will continue its steady 10-12% pa growth.
The higher priced properties will remain at the same level for about three months, then experience a strong upward surge. This is because there are a lot of available properties in this higher price range and these need to sell before there will be upward pressure on prices. We have about three months’ supply depending on enquiry. The market will then surge over the winter months. This market will also see around 12% growth with most of it focused in the second half of the year
Some key factors and points of interest: –

  • We are finding a surprising amount of Auckland buyers who are buying, but not selling their Auckland homes. About 30%. These people have enough equity in their current homes, that they can buy in Whangarei and not sell in Auckland. This is going to have a huge effect on the available Auckland properties for sale and push the Auckland prices up faster, as the already short supply gets shorter. The interest they pay on their new home loan will more than be covered by the increased equity in their existing loan. Not a bad strategy for a home buyer who owns an Auckland home.
  • Interest rates are very low and may even head down a small amount yet. Housing loans are now very affordable, and a $600,000 loan is going to cost you about $386 per week. Compare this to when Whangarei’s average house price was going up at $1700 per week. A buyer keeping their old home and buying another is going to get double the capital gain.
  • Nearly every general election causes the housing market to stall. I will make a bold prediction and say that will not happen this year. Historically most elections are based on a conservative government in power, and peoples fear that if a liberal, left- leaning government gets into power then we will see anti home ownership legislation, such as a Capital Gains tax. As we already have a left leaning government in power and they have stated they will not be introducing a capital gains tax, then there is no threat to home ownership. The worst that can happen is a more conservative government will take power at the end of the year. Therefore, I don’t see people holding off buying due to the election this time around. I have every chance of having egg on my face for this prediction as it will be a first, and historically elections are bad for real estate.
  • Building costs have skyrocketed after the Christchurch Earthquake recovery swallowed up most of the available builders. Builders have waiting lists, and many are pricing work on the basis that they can put a high cost on the quote and can afford to miss the contract. Anyone building will be looking at $3000 per sqm building costs this year, meaning that a modest $160m2 home will cost you $480,000. Add a $350,000 section to that and your new build costs are $830,000. Right now, existing homes are better value, but it will not take long for the current supply to be sold and then these new build costs will set the new prices.
  • Section supply is still at an all-time low. There is an adjustment period when people take time to accept the new section development prices and the new build costs, but when they do these new $400,000 plus section prices will be the norm.
  • The Americas cup will start 21 March next year. Impact on house prices …. none. It’s a great event but has almost no impact on the Real Estate market. It didn’t last time it was in NZ and it won’t this time either. 

Confession Time

Almost 90% of my predictions are proving accurate, right down to the percentage growth, however there are two glaring exceptions.  The first is rents. Two years ago, I predicted that average rents would hit $480 pw by the end of 2017. They are close to that now and there is continued strong upward pressure. Rents in excess of $600 pw are being achieved but the fact is I got it wrong. The pressure was there but the resistance to higher rents has taken longer to dissipate than I thought. A bit like walking through thick mud. Progress was made, but at a slower pace.  The second is Rental ownership. At the beginning of last year, I predicted that many of the mum and pop landlords would get out of the rental market and there may be a small drop in prices. This has proven to be totally wrong. There was a brief flurry of mum and pop investors getting out as compliance costs and landlord requirements got harder, but this was more than offset by first home buyers picking up the properties and interest rates dropping further, meaning people with money were looking for alternative investments. In my defence I did say that if the Government raised the first home buyer assistance ceiling from $400,000 to $450,000 in their budget, that this would alter the prediction and sure enough they did. However, two mistakes are two mistakes! I apologise and will fine tune my crystal ball.

How Fast is Whangarei Growing?

I have been a long-term advocate for growth in Whangarei and have written numerous articles about how it is growing twice as fast as the WDC are planning. The WDC were planning around  less than 1% growth whereas the District Health Boards’ new medical registrations was showing 2% growth. ( WDC have just released a paper saying we grew at 1.57% over the last few years.)  I have read some recent press articles  about rapid population growth in the district inspired by Government  spending:- such as the $800 million infrastructure spend , Ports of Auckland shifting and the Navy shifting , and  figures that say if  the Ports of Auckland  and the Navy shift north the district population could hit 145,000 in 10 years .  This figure is quoted by the NZ Herald as being expounded by the current WDC chief executive Rob Forlong.  Right now it”s  hard to think Whangarei’s can cope with this type of population growth.  It’s not that it won’t increase at a fast pace , but we simply don’t have the infrastructure to allow this growth. Sewage, electricity, roads, bridges, and then we don’t have the builders, electricians, plumbers etc to build all the houses.  We don’t have the time to wriggle through all the red tape in 10 years to create the sections needed. We can handle a population of 120,000  in 10 years, but 145,000 it would be an unmitigated disaster for the city, and we would have homeless people under every lamppost trying to find a dry sewage free place to stand. With optimistic predictions showing an average of approximately 2,500 new people per year for the next 10 years , we would need over 1,000 new houses per year. Currently we are building less than half that. We currently have about 450 sections being developed or in the planning stages , so even if we had the builders we don’t have the available land,  and sections take a lot of time to develop. 
The growth prediction has been  exaggerated and I hope people are not giving it too much credence . Let’s look at some factors

  • The Hunterwasser Building. Magic building and I’m personally glad it’s being built, even though  the reality is it’s going to run well over the given budget (already 4 Million and heading to 8 Million). It’s never going to turn a profit as sold to the ratepayers, and in fact will be a cost on us all for years to come. It will be a great tourist attraction,  but it on its own is not going to pull hundreds of permanent residents into the city. People don’t shift cities because of a Noddy House . 
  • The 800 plus million infrastructure spend. This is conditional upon the Labour coalition staying in power for 10 years or future governments buying into it. Then years and years of planning and resource management consents, buying properties, and dealing with objectors.  Some of the roading may be done reasonably quickly, as the planning was well advanced under the previous government, and the rail line could be re-opened, but most of the spend will be 5-10 years away at a very optimistic guess.
  • The Navy. This is not new. Stan Semenoff tried to get them here during his mayoralty and probably a few mayors before that. It would require a massive infrastructure investment to create suitable land and buildings and at best would take 10 years of preparation, but more likely 20-30.
  • Ports of Auckland. Again, a massive investment in infrastructure required. Most of the 800 million plus will need to have been spent on the big five projects and all the work done, before this concept could even start. So, at best 15 to 20 years.
  • Whangarei is growing and fast, but at The DHB estimated  rate of 2% per annum and allowing for an accelerating growth rate of 3%  we could see a further 24,000 people in the city and district in 10 years. From a base of 96,000 that’s around 121,000 in 10 years.. So, let’s not get too carried away with growth projections. 
  • What we can see now is that restaurants are getting fuller and car parking is getting harder to find. Doctor practices are full and it’s hard to get a new doctor, (a problem recognised by the DHB, who have appointed a recruitment Doctor, whose job it is to find other Doctors for Northland.) Traffic is building up and congestion is a common topic of conversation. Rentals are in short supply and the supermarkets are busier. The recreational walks and parks around the city have more people using them, so growth is happening but 145,000 is a 20 year projection, not a 10. 

Auckland and the NZ Herald.

It is no wonder newspaper readership is declining worldwide. In the midst of a statistically proven shortage of listings and housing in Auckland, ( Barfoots, REINZ, Trademe, the NZ Herald run with the following counter headline “ Housing U-turn: All of a sudden Auckland has a surplus of homes. (Amelia Wade 12/2/20)”
The article follows a comment made by the Salvation Army based on the last years Census. Yes! that’s the one where 1 in 7 people either partially completed it or didn’t do it at all. (700,000 people) The same one where as a result of the fiasco and independent review, the CEO, Liz MacPherson resigned before she was sacked.
Based on this census the Salvation army reported that the population of Auckland dropped 77,500 people in the last 5 years. They then go on the say this means there are now 7,168 surplus homes in Auckland. The Herald have swallowed this click bait and gone on to make this a morning headline. Talk about 2+2=3. 
Anyone who believes Auckland’s population has dropped 77,500 people hasn’t been there for the last 5 years. They haven’t seen the massive amount of housing construction that is gobbling up land faster than a vacuum cleaner sucks dust. Nor seen the arrival every year of 50,000 new permanent migrants, who mostly settle in Auckland. And what about the 40,000 estimated shortage of existing housing stock. I am sure the Salvation Army have a good purpose in using this statistic, but surely the NZ Herald don’t believe their own headline.

Tammy’s Rental Areas

I have published three newsletters where I have made comments on where to buy rental properties in Whangarei. Our rentals Business Development Manager, the very lovely and smart Tammy Drinkwater, has written her own summary of areas. For those wanting to see this follow the link to her newsletter. If you are a landlord, you should get on her database as she puts out very good material. click here  to see her newsletters

November 2021 – Crazy times

November 2021 Newsletter


  • Predictions for House prices in Whangarei.
  • Significant Natural Areas called SNA’s
  • Brightline Test Simplified
  • Why Fruit Trees are Flowering so late
  • WDC experiment with Dog Rego
  • Lessons from a Withel!

Predictions for House prices in Whangarei.

We are seeing two very different sets of forces building in the market. One is driving prices up, while the other is gathering on the horizon like a fast approaching tropical storm.  

Forces driving prices higher :-

Demand. There are still not enough houses to satisfy demand. The population is growing faster than the housing supply. 

Listings. We are seeing less listing on the market than at any time during this boom period. With low interest rates people are choosing to leave their money in their houses rather than in the bank. With less listings there is increasing pressure on the existing available houses. 

Building prices are rocketing. Builders are reluctant to do fixed price contracts because building materials can rise during the build and eat into the profit. 

Building products are in short supply causing the cost of materials to skyrocket. 

Inflation is rising. House prices tend to go up in high inflation environments. 

Who let the dogs out.  The Aucklanders will be let out soon enough and they are sick of Auckland.  

Forces suggesting prices will slow down or stop rising :- 

Public mood. The perception that house prices are too high and rises are due to stop soon. 

Interest rates are rising.  Interest rates have proven to be the only effective tool in slowing house price rises. As they go up houses become less affordable and price rises slow or stop. 

Discussion and conclusion.

The Aucklanders are going to be released from quarantine jail soon enough and many of them will use their get out of jail free card to get out of Auckland for good. We have been surprised at just how active the market has been without a strong Auckland influence and their big fat wallets. 

There are some very strong upward pressures on the housing market such as rising building costs. Traditionally we have seen a three-year mini cycle, where building costs rise, a gap opens up between existing houses and new builds and then at three-year intervals the existing houses do a jump as they close the gap. Because the market has been so strong, existing houses have kept pace with new, so we haven’t seen the gap this cycle. 

The reserve Bank recently released figures that show a change in the house price to land ratio:- “Land now accounted for 60 per cent of a median house price, compared to 40 per cent five years ago, ….. which reflected the constraints on land availability? (Susan Edmunds. Stuff). 

Herein lies one of the biggest drivers of House prices. When the land value is now 60% of the total value in a property, then little can be achieved by reducing building costs. You must reduce land costs first, which most governments, local and national, seem unable to do.  You  must reduce compliance costs which most local Governments don’t want to do, as charging for compliance costs is a significant part of any Councils income.  If we think of the saying, “ Its hard to remember your initial objective was to drain the swamp, when you are up to your arse in Alligators.   Not surprisingly the local governments have realized there is a lot of money in Alligator skins and have no intention of draining the lucrative swamp. Unless change is forced on local Government by national Government, we will only see land prices and the ratio to the dwellings go up. 

 We come back to Mark Twain’s famous quote “Buy land, they are not making any more of it” 

There are only two factors working against further house rises. Public sentiment and interest rates. Of these interest rates is the one to focus on. Any interest rate below 4% is still historically low. You can still fix for 2 years below this, but all 5-year rates are now around 5%. 

Interest rate rises have two effects. People rush to buy before they go up, putting upward pressure on the market. The second is interest rate rises slowly strangle some people’s ability to buy, starting with first home buyers and affecting everyone’s income to loan ratio. The higher the interest rate the more you have to earn to service the loan. This is a rapidly rising barrier to qualifying for a loan. When you have a rising marketplace, and a rising barrier to getting a loan, you have an expanding gap between the market and your ability to qualify for a loan. This takes a large group of people out of the market for a number of years as they have to save more for a deposit and they have to have a higher income to meet the income to loan ratio. The most effected are the first home buyers and we will see these people dropping out of the market for 1-2 years. 

Interest rate rises are not going to affect the Auckland buyers as they are usually selling in the Auckland market and reducing debt to buy in the Whangarei market. Many will welcome the higher interest rates as they will get a higher return on any surplus funds left over from their Auckland sale. In every other market we have had interest rate rises have eventually cooled the market. These rate rises will do the same, but gradually as they raise the 1-year interest rate above 4%. There will be very strong pressures resisting the slow-down so we expect the slow-down to be hesitant.  

A side note !  Keep in mind that historically, over 130 years in NZ, house prices have averaged 8% growth. The median price in Whangarei is currently $700,000 (REINZ Sept 2021) up 27.3% on last year ($550,000.) At 8% , in 10 years’ time, the median price in Whangarei will be $1,400,000. To get to this figure prices have to rise an average of $70,000 per year. We have had over three years of that growth in the last year, so expect a period of 2-3 years of little growth within the next 10 years. 

In previous articles I’ve discussed the link between funding for small business and the value of the owner’s house. When a small business owner goes to the bank for funding, the Bank will ask them to get a valuation on their house. The bank will then lend the business money, based on how much equity the owner has in their house, and secure the loaned amount as a mortgage on the house. The standard loan to asset ratios is applied, meaning you can borrow up to about 80% of owners’ properties value. The loan will usually be an overdraft but secured against the owner’s property. A rising market means more capital is available to small business.  The housing market is directly linked to small business funding.  

The Reserve Bank is very aware of this and has recently asked Banks to be “Courageous” and take a risk and lend on the business rather than the house equity. But like the many times this has been asked before it too will fall on deaf ears. Adrian Orr might as well have talked to a brick wall, Its pretty much the opposite of the Banks risk adverse culture, purpose, and processes. Here is the reality from the Reserve bank’s own research. “The central bank’s own data shows bank lending to businesses shrank by 5 billion between March when the Covid crisis began and September this year” (Business Desk 11/11)   

Due to the severe trading restrictions caused by Covid Lockdowns, there are thousands of small family-owned businesses who are heavily mortgaged to fund their businesses. Rising interest rates will affect these people first. Some will have very little equity left and any interest rate rise will result in them being unable to access further funding, nor to service existing debt. While rising interest rates will have a gradual and slow effect on house prices, they will have a rapid and disastrous effect of small struggling businesses. 

The Reserve Bank is fully aware of the impact rapidly rising interest rates will have on the business economy and employment yet needs to use its only effective tool to slow the housing market. Quite the dilemma and will be the one factor weighing against fast rate rises. The Reserve Bank is going to have to juggle how much collateral damage is acceptable (Business failure and its subsequent effect on employment) and walk the knife edge.  

This process is one of the most significant and misunderstood land grabs in New Zealand history since the Māori Wars.

It is part of the Resource Management Act, and as of 2016 requires councils to identify SNAs in their areas. Significant has not been defined and each council can apply different standards when assessing areas. I have no doubt that the WDC staff have sat down in front of a map and drawn lines around every larger area of native bush in the district. No doubt because some of the land recently designated is nothing more than Tobacco weed and Gorse.  It is clear no one has looked at the land in person. The vast majority of this land is privately owned.

While the owners don’t actually lose the land, they lose a lot of rights of usage of it and are now burdened with some serious restrictions in what they can do with the property.

It’ s a clear victory for Forest and Bird and they have made some of the many explanations to the public.

“Existing grazing, tourism or honey production can carry on. But these activities won’t be able to intensify, and new activities won’t be allowed to negatively affect SNA’s” (J Miller F&B)

“The sorts of activities that might harm a SNA are felling of trees for subdivision or clearing bush to convert into pasture”. (J. Miller F&B)

SNAS are the child of the Draft National Policy Statement on Indigenous Biodiversity. The group is made up of Forest and Bird, Federated Farmers, The Freshwater Iwi Leadership group, the Forest Owners Association, and representatives from the Extractive / Infrastructure Industries. (loggers)

There were no representatives nor consultation with the numerous lifestyle people who actually own large tracks of the land.

While this concept is not finalized as Māori have said “Hey this looks like another land grab”, when it comes to subdivision of land, the Councils are already treating it as law.

This puts a whole new process onto any subdivision consent and makes subdividing any bush blocks a very tricky and expensive business. If your subdivision involves clearing any bush for either a house site, or access to that house site, they can say no. 

  • Only applies if other land provisions do not apply e.g., subdivision.
  • Applies to estate or interest in land acquired on or after 1 October 2015.
  • Two-year period extended to five years for land acquired on or after 29 March 2018.
  • Five-year period extended to 10 years for land acquired on or after 27 March 2021.
  • Only applies to “residential land”.
  • Applies world-wide i.e., includes property acquired overseas by NZ tax residents.
  • Bright-line period commences on the date the property is registered in the client’s name
  • The sale date is the date a Sale and Purchase agreement is entered


Some people have been caught out by the start and end dates. It starts when you pay the physically pay the money over and your name gets registered on the title, but the qualifying period ends the day you enter into the agreement to sell your property.  You could enter a conditional contract where the other party have to sell their property and then you may have a delay in settling for say Covid reasons. That’s just tough for you, it counted from the day you entered into the agreement to sell. The way the Brightline test has developed has created a very unfair Capital gains type tax. Most taxes are fair and apply to the year you earn the income. The Brightline test applies to the year you sell the property, so you pay tax on say 9 years of investment in one single year, and you pay it at your top tax rate. That sale will most likely take your income over $180,000 so you immediately qualify for the top rate of 39% in the dollar for any income over $180,000. In effect it’s a 39% capital gains tax. No wonder people are holding onto properties longer.

I have moaned to all who will listen, which is an ever-diminishing group, that we in the winterless north are having our fruit trees flower way later than in cooler climates. My dear 90-year-old mum has fruit set on all her Christchurch fruit trees over 8 weeks ago, while here is the winterless north my Nashi hasn’t flower at all and my Apple is just showing the first signs of bud in November. 

Instead of this being a sign that “Climate Change” is a load of bumkin, this is further evidence that it is a real thing. Thanks to the very knowledgeable and talented Don Waterhouse of Open2view, I finally have the answer…. Vernalization! 

At least I now know why on the 8th of November my trees look like this

Vernalization or more commonly known as “Chill Factor”. Deciduous fruit trees require a certain number of chill hours over the winter months. This is when the temperature is between zero and 7% Celsius. While we did get the occasional mild frost, this winter has been warmer. In a mild winter the hormone that creates dormancy in the plant doesn’t get the spring signal that it’s time to stop doing its job, so it remains in place long into the season. When the tree finally flowers is can be sporadic and often results in a poor crop.

I was sent this by a dog owner friend who was disgusted with the following, especially as the WDC had just put-up fees to the law-abiding owners by around 40%. 

WDC signage; 

No penalties on registering previously unregistered dogs.

All dog owners who have never registered their dogs or failed to do so last year can have outstanding fees waived if they register in-person for the coming year, between 1 June and 31 July 2021.Owners who come in-person will face no penalties and previous registration fees will be waived. This offer is not available for online payments.” The gentleman concerned challenged the WDC and in an email was told they were trying an innovative way to get unregistered owners to register their pets.

They wrote: – 

“Unfortunately, if not surprisingly, only a very few small number of dog owners took up this offer and came forward during this period.” 

This reminds me of the time when the same Gentleman and I worked for Housing Corporation of New Zealand, and they brought in the most deluded of all policies.” The Kindness Policy”. If a tenant trashed a house, we were to kindly repair the house for them, have a gentle talk, and leave them to it. The result would be a tenant, overcome with the spirit of goodwill, who would reform their destructive ways forever. Of course the tenants promptly smashed the houses again and the policy died a quick death. The Policy maker no doubt got promoted for their cleverness. I suspect this W.D.C innovation won’t be repeated.

In 1974, I, and ten other 17 year olds embarked on the journey of a lifetime. We were the very last group to do Volunteer Service Abroad under the School leaver Scheme. We spent 12 months in various Pacific Islands, mostly teaching in Schools. Several times a year this now 65–66-year-old group meet either in person or via zoom for a catch-up. At the last meeting the newest hot potato cropped up…vaccinations versus antivaxxers. 

Enter one ex detective with the surname in the heading. He explained that since retirement he grew experimental flowers (Lets call them Roses) for an English company that was developing disease resistance varieties. He grows them on his acres in the North Island and presumably adds to the research being done across the world. He said the enlightening words. “When I grow these roses, I must keep an eye out for diseased Roses in the plot. The resistant ones can mostly tolerate one diseased rose as a neighbour, but as others succumb to the disease the number of pathogens in the environment slowly overcomes the healthy plants resistance.” 

It’s like a fortress. Enough sustained cannon bombardment will eventually crumble the strongest stone defence wall. People are the same, our resistance to a disease can be overcome by extremely high exposure to that toxin. We must stop calling vaccines immunity. its misleading. The word should be resistance.” 

George Bernard Shaw once wrote, “A smoker and a non-smoker cannot be equally free in the same railway carriage”.

 If we think of a vaccine as increasing one’s resistance to a disease rather than being an immunity from it, then second and third jabs make more sense. People not wanting to be exposed to people with high risk such as unvaccinated peoples makes more sense. Why vaccinated people don’t want to share space with unvaccinated people makes more sense. Why people with a vaccine are still at risk of catching the disease from others, although at a lesser level, makes more sense. 

Just like your watch is water resistance rather than waterproof. Under the right circumstances your watch can still leak but is less likely to do so at that resistance depth. Resistance is a clearer model than immunity. We should be talking about Herd resistance rather than Herd immunity. 

The last time I personally experienced a country so divided was in the 1981 Springbok Tour.  My birthday is the 28th of July and I lived in Hamilton, which happened to be a Saturday that year. It also happened to be the day South Africa played Waikato, and protestors tore the boundary fence down and invaded the ground. They successfully forced the game to be cancelled. 

It also happened to be the day I held my Birthday party. I had a very diverse group of friends (still do) and half the people had gone to watch the game and the other half had gone to stop the game. The protestors sat in the lounge, the rugby enthusiasts sat in the kitchen and dining room. The atmosphere was thick with tension, with mumbled threats from the kitchen/ dining area and the gentle humming of Kum- Ba- Yah from the lounge. This was the first day in my life where my personal acquaintances and friends became very angry at each other. The Birthday sucked and the country thereafter became increasingly split. It became difficult to try to see both sides and sit on the fence. If you did, you were the enemy of both sides. The country became polarized on one side or the other. Over time the good news is we healed, and those days are but a distant memory. New Zealanders are mostly good people and the Kiwi spirit will eventually heal the current rift….or maybe not. 

• The Current Situation in our Office
• Section Development Down
• Finding lions in Africa!
• Super low Interest Rates and Job losses.
• Banks Being Kind.
• Number of listings
• Changing Patterns Due to Low Interest Rates
• My Old Enemy the Media and Job Losses.
• Hiding in the Invisible Future
• Debt levels
• Making New Money
• Effect on Assets
• The New Migrants
• Election Year
• A Close Relative 
• Prediction
• The Two World bubbles.
• Can You Help

I pride myself on making accurate market forecasts of where the Real Estate market in Whangarei is going next. Over the past 35 years I have had past patterns to call on to predict the future. This market is unlike any we have ever seen before and therefore there are no patterns to look at, or follow. It is a big mistake to look at past recessions and say this one will follow the same patterns as this one has its own set of rules. Personally, I have felt the market is too uncertain to make a prediction, however I am being asked for some guidance now, rather than when the dust has settled.
It is the middle of winter and we would expect the market to have slowed down by now. What we are seeing is a property market behaving more like in a boom market than a recessionary market.
We are only a few months off an election, but instead of the market pausing for the election we have lots of sales happening. This is unusual. 
There appears no doubt the economy will hit a recession. The question is, will this recession behave as past recessions have.
Below I will look at the key factors and make an assessment for Whangarei based on the evidence I am looking at.

The Current Situation in our Office

Many owners are taking a wait and see approach. Listing numbers are building but a slow rate and are not keeping up with demand. We we are seeing active sales and are pretty much back to pre-covid levels. We would be selling more, but as there is a shortage of good properties and we have a supply problem.  Buyer inquiries are up in most areas and price ranges. 
 We are back to having multiple offers on most reasonably priced properties with one property recently having nine offers on it. 3-4 offers on one property are common. The sales are 90% in the $350,000-$650,000 price range with only the occasional higher sale. Higher priced rentals ($550 plus) are taking longer to fill, suggesting there is some resistance building in rental price  increases.  

Section Development Down 

Many of the building companies have had their development money pulled by the banks. This has happened in the past and will result in a shortage of sections in 1-3 years. The catch-up in total housing numbers that has been happening across the country will stall and once again we will see pressure on existing house prices as the supply of properties falls behind the demand. It is like one of those frustrating dreams where we are always chasing something but never quite catch up. We are still well behind the amount of houses our population size requires. (40,000-50,000)   The result is likely to be continued upward pressure on prices.

Finding lions in Africa!

If you are on Safari and looking for lions in Africa, you first look for the vultures. They are circling high in the sky either waiting for a wounded animal to die or for the lions to finish feeding so they can pick the carcass. In real estate we find the bargain vultures come out every downturn. They are easy to recognise, because they are looking for wounded or stressed out sellers, and they make low offers. They use words like:- “ we are cash buyers “ “and the market is stuffed” or “we don’t want to insult the owner but this is what we would offer” ( Invariably very insulting) or “the owner would be  foolish to turn this down” . These people will look at lots of properties and make lots of low-ball offers hoping to meet a stressed seller. Today these people are out in force trying to talk the market down. They use the media reports of massive price drops to justify their low offers. They are trying to pick up a bargain at someone else’s expense.
I have seen this scenario many times before. This time around I think we are going to see lots of starving vultures, certainly for the next 6 months at least.  I remember taking a well know economist to lunch after he made a low-ball offer on a property. Over lunch he explained all the perfectly valid reasons, (supported by graphs and charts and free form diagrams,) as to why the property market was overpriced and heading down. He was so certain of it; he had sold his own home and was waiting for the catastrophe to occur. The year was 2003 and sure enough he was right! Just five years later In 2008 the property market dropped all of 7% after a record 100% rise from the time of our lunch in 2003 to the 2008 global financial crash. After he had sold, and while he was eagerly making low-ball offers based on his graphs and charts, the average house price had doubled in value. 

Super low Interest Rates and Job losses

There is one key difference between this forthcoming recession and all the others. Low interest rates! . You can borrow for around 2.6% and there does not seem to be any threat of rates going higher for many years to come. That means a $500,000 loan taken over 30 years is going to cost you $461.68c per week to repay.Consider that it will cost you around $480-$520 per week to rent the same home.You have to ask, “why would people have to sell.” “Because they lost their jobs” the Vultures eagerly squawk!  Well yes there have been substantial job loses,  and probably more to come, and these are affecting many families in serious and concerning ways. However, some 43% of homeowners have no mortgage at all so you can take these people off your kill horizon. The average mortgage is over 10 years old so was taken out when property prices were half what they are today. Therefore the $500,000 borrowed today was only $250,000 when borrowed 10 years ago, and the repayments on that are around $280 per week. Most families today have two incomes so can survive for short periods of time if required, and there is substantial government hardship support. The people most affected by this crisis are the people in the Tourist sectors. That is the tourist towns like Queenstown, Rotorua and Paihia. And the people most effected are the minimum wage earners in those cities, most of whom do not own a house. The last time I was in Queenstown I was noted  that every person who served me, be that in a shop, a restaurant, or a service,  had an accent. I would ask them where they came from and the answers were Brazil, Peru, Ireland, England, Italy, and many other parts of the world. Not one was a Kiwi. They were on working holidays earning their daily keep. Tony Alexander has summed up this scenario in a few quick sentences; “Heading into the 2008 recession 4% of our workforce were people on a working visa. That now stands at 8% and such visa holders have accounted for 25% of the net job’s growth in NZ over the last 10 years. These people are not property owners.” Think about that for a moment. We may be heading toward double figure unemployment from the low figure of 4.6%. 8% of our current workforce are overseas people on working Visas. 10-12% job losses suddenly do not look so bad. This adds to the question “Where are the super stressed sellers going to come from?”

Banks Being Kind.

This crisis is a medical crisis. It is not caused by poor lending policies and zero or negative property equity. The banks are financially healthy, so do not have to recover loan money to save themselves. Even better, Banks are inviting short term accommodations like interest only loans to get people over the hard times. Interest only over a $500,000 loan is $250 per week. You can even get a complete mortgage holiday where you do not have to pay any mortgage at all for a time, (I do not recommend this unless there is no other option) . So where is the pressure to sell going to come from? 

Number of listings
Another biggie from Tony Alexander’s observations, is that in 2008 we had 58,000 homes listed for sale. Today we have just 19,000. There is a severe shortage of properties for sale and a growing buyer demand. If there is any slowdown in our local  market it is going to be because we do not have enough listings and that is going to put upward pressure on property.

Changing Patterns Due to Low Interest Rates
In a previous newsletter I mentioned that the number of people who were buying a home and keeping their old home had risen dramatically. The low interest rates often mean you can buy new and keep your old house, rent it, and have the tenant pay the mortgage. A simple way to get into the rental market. We are also finding landlords withdrawing properties from sale, because the interest rates are so affordable. The result is more pressure on listing numbers.

My Old Enemy the Media and Job Losses.

The media should carry a health warning just like a cigarette pack. “Ingesting this material could be damaging to your Health “. The standards of reporting have dropped so low. Investigative journalism is rare and so much media information is based on the reporter following social media reports like Twitter and many of the reports are used to prove a story line, rather than have the story based on the evidence.  A glaring example of the Media sensationalism was the 1000 jobs Fletcher’s are shedding. It’s reported as being a result of COVID 19, but it’s not! Fletcher’s where is serious trouble in 2018 with a loss of $660 million in its Building and interiors division. Fletcher’s employ 21,000 people across all its divisions and like any sound business had to cut back to survive. They cut 4.7% of their workforce. That is equivalent to a company of 40 people cutting one job from its payroll. Fletcher’s had to reduce overheads including jobs based on its 2018 and 2019 performance, not Covid as reported. Many companies have taken the “Covid opportunity” to trim their fat and I would suggest that around half or the total job losses (excepting tourism) are simply businesses trimming their overheads and using Covid as the excuse. Locally we are about to witness some changes at the Marsden Point Refinery. They are going to rationalize the operation and may well end up closing the production side of the company, and there will be job losses. It will get blamed on Covid 19,  and admittedly the refinery will be affected by the airline cutback as Jet fuel is a big earner for them, but this restructure is a long time in the making. The refinery has only been borderline profitable for some years now and a rationalization was coming anyway. It is cheaper to buy refined fuel from overseas than it is to refine it ourselves. The changes in the refinery were going to happen anyway. Just as an aside …don’t forget that our petrol price is driven up by the Governments outrageous $1.03 tax* per litre tax on fuel. ( Petrol tax $0.73 c plus GST on total at $2.00 per litre). About half your petrol bill is Government taxes!!!  Rationalizing  the refinery is the right move as Fuel as we know it is changing. Volkswagen have just joined the rapidly growing electric car movement by declaring its Zwickau factory has produced its last internal combustion vehicle as they transition to electric vehicles. The year 2021. (next year) is when electric vehicle prices are predicted to match ICE vehicles and they will only get cheaper from then on. It makes little point to keep a dinosaur industry such as Oil Refining  going in a small country like ours going, when the future of fossil fuels is limited.
Hiding in the Invisible Future
Public enemy #1. the media have ignored the facts that property prices have risen since Covid lock-down and continue to report anyone willing to predict a property crash. With the current wave of data proving them wrong they have moved into the grey area of tomorrow. The imminent recession will come September, October, and November. This is just too convenient. If you make predictions into the future, then facts cannot prove you wrong. It is a certainty that our economy is in a struggle now and things will get worse and we will have some form of recession. It will probably get worse next year, when the election is over , but the problem is that this coming recession is like no other  recession. All the current rules do not apply. I see some economists are pushing the main impact of the recession out to 2021 now. Again, I don’t think anyone knows what will happen. Logic says we are heading into hard times, but the current evidence is saying differently. I drove from Whangarei Heads through town out to Ngunguru on Sunday and just about all the for-sale signs I saw had a SOLD on them.

Debt levels

In past recessions the debt level has been predominantly carried by individual persons through borrowing. Our personal debt level is at record highs but most of this is in housing mortgages, which many will argue is an investment rather than a true debt. Today the government have shouldered the lion’s share of the new debt with its 60 Billion budget this year. The 60 Billion budget is a Government debt, and not individual debt. You and I wont lose sleep over our new debt levels, but the minister of Finance Grant Robertson may! Unless he could magically make some more money!!! Magically Making More Money Unlike individuals, Governments can create money through their Reserve Bank to stimulate the economy and pay back debt (Quantitative Easing) which is exactly what Grant Robertson has said they will do.It has taken me a while to get my head around this concept but here is an example from England of how quantitative easing works.  “The Bank of England purchased financial assets, almost exclusively government bonds- from pension funds and insurance companies. It paid for these bonds by creating new central bank reserves (this is the created money) and is the type of money that banks use to pay each other. The pension funds would sell the bonds to the Bank of England and in exchange, they would receive deposits (money) in an account at one of the major banks. The bank ends up with a new deposit (a liability from it to the pension fund) and a new asset, Central bank reserves at the Bank of England.
Quantitative Easing therefore simultaneously increased A) :- the amount of central bank money , which is used in the system that banks use to pay each other, and B):- the amount of commercial liquidity ( deposits in the bank accounts of people and companies). Only the deposits can actually be spent in the real economy, as central bank reserves are just for the internal use between banks and the bank of England” (
Effect on Assets
What impact does this creation of money have? Firstly, is spreads the financial shock over several years rather than having it all in one year. Secondly it creates a big supply of money into the system which boosts the economy, but devalues money as there is more of it in circulation. If money is worth less, then the things it buys are worth more. Traditionally this is the cause of inflation, however for now inflation is a thing of the past, and even countries like Japan who are actively printing money to get inflation, cannot get it rising. But what does rise in price are assets. Assets like property, gold, and to a lesser extent shares. The equation is simple. (More money + the same amount of property(assets) = rising prices.)
The New Migrants
We have the huge number of Kiwis returning to NZ. The Covid crisis is not going away anytime soon so our people are coming back, and they are buying property. Statistics NZ estimate that 21,000 New Zealanders returned home during December – March and that is accelerating. The quarantine facilities are talking about 2,000- 3,000 new arrivals per week, most of which will be Kiwis. Many of these people have come home for good and will be able to buy a home. Statistics NZ also estimate there are a further 800,000 New Zealanders still living overseas, so the pool of potential returning Kiwis is very large. To put that number in perspective , that the total population of Wellington, Hamilton, Tauranga and Whangarei all in one. 

Election Year

An election year is usually a bad year for Real Estate. In a previous newsletter I said that I did not think this would be the case this year as the worst-case scenario is moving from a left-ish government to a right-ish government so no major worries for homeowners. Being an election year, I think we will see some major pushes on the job and economy front and as many negative recessionary effects are going to be delayed until after the election.  The government is going to be pushing companies to retain jobs so the overall impact,  while severe, will not be as bad as many are predicting and thus we are seeing the new predictions that the full impact of a recession won’t hit until 2021.

A Close Relative- 

…. drives trucks for a big national trucking company. During Covid the company reduced the guaranteed driving hours from 40 per week to 30 per week in anticipation of less work. My close relatives experience was  NO drop in hours. He still regularly drives 40-50 hours a week.  The fears of a slow-down were worse than the reality. Many firms have paid the government wage subsidy back as they have had no drop in work. While the predictions have been dire, we are seeing a lot of evidence that the situation on the ground is not as bad as expected.


So back to the circling Vultures and the dire media led predictions about property prices. This crisis is very  different from any other. We have healthy banks, who have a big safety level built into their house lending and very low interest rates. Listing numbers are dropping from an already low level and demand is increasing. To get housing prices reducing you have to have stressed owners, who are forced to take a lower price or lose their  home. You have to ask the question. “Where is the financial pressure to sell going to come from? When is the Bank pressure to force mortgage sales going to arise?  Where are the super stressed sellers going to come from?  On the reverse we have upward pressure as more buyers enter the market and an already existing shortage listings. Prediction # Its too early to look at 2021 which could be a very different year,   but the current evidence for the rest of 2020  shows the Whangarei property market  remaining steady and probably rising .  

Roll on the Vaccine.

Unless we get a vaccine, we are heading for two different worlds. A world that has come to live with Covid and a world that has contained it. The smaller of the two worlds will be ours. The island nations that have a big moat around them and have either contained or eliminated Covid.  The bigger of the worlds will be those that have lost the containment battle and now live with the virus. In Qatar 3.3 of every 100 people has or has had the virus. In the USA they are closing in on 1 in every 100 people had or having the virus. In Brazil it is 1 in every 160. At this stage you would have to say the battle is lost in these countries.  At best they can slow it down , but their chances of elimination are long gone.  They are going to have to live through the crisis and in terms of numbers the virus has only just started. In the USA over 99% of the population have not had it.  The only way they can win this war is with a vaccine or effective treatment.  Until there is a vaccine, we will have two bubbles. Those with and those without. Unfortunately, we will be in the smaller without  bubble, but fortunately,  we are only small ourselves and don’t need a big bubble to survive. It doesn’t mean we can’t trade outside our bubble, it means we can’t visit each other and therefore overseas tourism is going to be in trouble for a time to come. A vaccine or effective treatment will join these two bubbles together, however while I hope a vaccine will be found within the next few months, the reality is that this is a corona type virus. The common cold is a corona type virus and we don’t have a vaccine for that.

Property market and the Corona Virus.

  • The Bug
  • The economy
  • The effect on property
  • Future bugs a certainty
  • Future economic changes

You are reading my fifth  attempt to write this newsletter. Every 24 hours I have gone back and edited it again because the changes are happening so fast. The day you get this I’ll be having regrets as something will have changed, or been clarified since writing. But as they say “Fools rush in where Angels fear to tread”. So true to form: – Below are a selection of facts, alternative facts and opinions on the virus and its effect on the property market. Keeping in mind we have never had this strain of bug before and in my 35 years of selling Real Estate I have never dealt with this before, so its all new ground.

This strain of bug before and in my 35 years of selling Real Estate I have never dealt with this before, so its all new ground.

The bug undefined

  • We have had many previous out of control bugs:- Polio, measles, chicken pox, Mumps, Influenza, Colds ,Ebola and many more. As humans we survived them all and will do so again. But Covid 19 is only a precursor and forewarning of more bugs to come. 
  • The Chinese contagion looks like it has been controlled and is currently in decline. It is a military state, so enforcement of restrictions may be easier than in the west. Many of the previously closed highways, cities and factories are re-opening. This is just 3 months after the first reported illness at the end of December. Around 70% of the people who were hospitalised in China are now recovered. Spain and Italy are showing signs of the infection rate declining , so this will have an end. 
  • Our lock-down will isolate and localize infections. I have no doubt it is the right thing to do, even though I share the frustration of many at the self-righteous and often ignorant human beings who will flout the rules.
  • In times of War, necessity means that technology leaps forward at a much faster pace than in times of peace. Covid 19 is a viral war against humanity and as such vaccines will be developed much quicker than in times of peace. Especially as China now has around 80,000-100,000 recovered people with effective antibodies to study. The timeline to develop an effective vaccine will be shorter than the 18 months being touted and most likely  3-4 months.
  • Old fashioned Quinine (anti Malaria treatment) has been touted as a preventative measure. The sales of Gin will increase as people test this for themselves. Meanwhile a man has died in the USA after listening to Trump and self-medicating with Chloro-quinine. In fairness Trump was right, he won’t be getting Covid 19.
  • We are an Island nation with easily protected borders and as of today only have a minor semi-controlled community outbreak, unlike China, Italy, Spain, the rest of Europe and the USA. We have been very lucky so far and we can stop this thing. But we need the majority of the population to obey the lockdown rules. We need to have confidence in our health system that they can track the virus spread and conduct the right tests on the right people at the right time. It is unfortunate that out only death to date was misdiagnosed as Flu. There is a big gap between talking pretty words in parliament and the actual implementation of the legislation. 
  • If there is going to be a rebel group, it will be the young. They usually have symptoms milder than a cold and let’s face it, they have the most to gain by a shift in power from the old to the young. Let’s hope they remember they have parents and grandparents and remain glued to their screens in what must be a continuation of a type of self-isolation they are practiced at already. 
  • Let’s look at what this virus is actually going to do. It’s basically going to leave our youngest kids alone. It will hurt some of our millennials, but most will be fine. By the time you are hitting fifty your personal risk factor will be increasing. Sixty and you have to be extra careful, seventy your chances of dying are about 7-8% IF YOU GET HOSPITALISED!! Remember about 87% of people who get it will recover at home without hospitalisation. 80 plus and your chances after hospitalization are about 15% of dying. If you have a chronic illness and have a weakened body or immune system you have a greater chance of dying. (in China a 100-year-old man has fully recovered from the virus)
  • So, while the personal picture is very scary, the actual impact on the planetary population of 7 billion will be small.

The Economyundefined

  • The virus will have a devastating  effect on the economy in the short term, because of the necessary actions required to control it, but it may be short lived 3-4 months.
  • The real issue is the recovery time. How much has the economy been damaged and how long will it take to get back to where we were. Factories don’t just push a button and start again. Transport requires a lot of logistics and supplies to operate; how long will it take to get these moving again. Tourism may never fully recover. Confidence is a big driver and until that returns the economy will stagnate. The recovery could happen quickly or take a decade. 
  • While the effects will be global, this is not a financial meltdown. The global economy could recover very quickly after the virus is either contained or sufficient people have been exposed to it and recovered with immunity.  The “herd effect” where enough people have immunity to stop the spread. So, imagine if it was all over by August, September and October. In New Zealand this could be the end of April or May. It is conceivable that we could be fully trading with China by August. 
  • The virus shutdown will not be fully over until  an effective vaccine is developed. Until then we will have two separate worlds. One where countries have controlled the spread of the virus through social isolation, and one where the virus spread out of control and the population have immunity through having survived it. It looks like this divide will be rich nations versus poor nations. The continents of South America and Africa look like they will head the out of control route. Thereafter the only way the “isolation” nations can keep the virus out of its protected, yet vulnerable people, is to keep the inhabitants of the “immunity” nations out. Therefore tourism in New Zealand will be a dead duck until the vaccine is developed. The development  of the vaccine will be the start of normalisation. 
  • We will see jobs go, but New Zealand is probably in the best position it has ever been in regarding employment. We have around 4% unemployed, with many industries unable to find NZ workers. We currently have thousands of imported workers in the agricultural and horticulture sector, the building sector, and the transport sector. We have a lot of available jobs in the country simply by sending the imported workers home. (Many employers will resist this as they have found their imports are way better than the locals.) . New Zealand has some fat in the employment market. We can absorb several thousand job losses.
  • This recession is different from any other. It is not being driven by bad economic circumstances, nor an ailing economy. For a great comparison of the major differences have a look at Tony Alexanders newsletter

The Effect on Property

  • In times of crisis there are two major fall backs. Gold and Property!. 
  • In every financial  or global crisis we see the gloss disappear off Shares. Prices drop as they are doing now. Shares in a time of crisis are a poor investment Shares are your slice of other companies and as such are subject to global disasters.
  • They  rely on a growing economy. People won’t  pull their money out of shares as its too late, but they won’t be heavily investing in shares for a while either.
  • Gold has to be rising in value for you to make money and at $2631 per ounce it is just about as high as it can go.  Gold has averaged around $1,500 NZ for the last 3 years, so it would take a bold person to buy now expecting further significant increases. Meanwhile it doesn’t earn any income for you. It has to go up in value to make money and gold  is notoriously fickle. You  have to pick the up cycle and sell before the down cycle. Gold is basically gambling.
  • Property is more stable and has historically had  a steady capital increase. It’s something people simply can’t do without, unless they have a large livable boat, so its’ value remains high as long as there are people in this world. It has value while you hold it, be that rents or your personal ability to utilise it for food or other resources.
  • There is no long term financial  comparison to property. and there is nothing like a world-wide crisis to illustrate this. 
  • Interest rates are at an all-time low, so housing is more affordable than ever. In previous recessions we have had high interest rates so when people have lost their incomes, they have been forced to sell their property, often at a bargain price and rent. Today a $500,000 mortgage will cost you about $517 per week to repay. A three-bedroom home to rent will cost you about $500 pw.  The figures to own as to rent are nearly the same. This time we are not going to see the mass of mortgage sales that we have seen in previous recessions.
  • There is no incentive for people to keep money in the bank. Over the last three years we have seen a growing trend of people pulling money out of banks and putting it into rental investments. This will accelerate as interest rates drop. 
  • Lots of people with NZ passports are going to return home. We see this in every major crisis, be that war, pestilence or financial crisis, … Kiwis come home.  Some to raise their kids in a safer environment along with their foreign-born partners. These people will be financially better off than the average Kiwi and they will buy property. They will be a major driver in the  dearer price range.
  • Australia hasn’t treated the 650,000 New Zealanders living in their country very well. They are second class citizens in a country they may have lived in for 20 or more years. We will see a lot of these people either having to return due to financial hardship or choosing to return because they realise they are expendable non citizens, who are being treated very poorly. 
  • Rural and country living will grow in popularity. People will want the safety of greater isolation and a greater ability to grow their own food. Lifestyle blocks will have a resurgence in popularity. Think of the people who have had to self -isolate in a 40-60m2 high-rise Auckland apartment. The first 24 hours are going to feel like a week, the next like a month,  and after 4 weeks they will literally be climbing the walls. That urban, coffee and wine  culture lifestyle is going to look a little bleak!. People are going to want to be live in an environment that allows enjoyment of the outdoors and space to roam. Animals to talk to and fruit and vegetables to grow.
  • People will want to get out of the big Cities and their hotbeds of disease. There will be increased migration  out of Auckland, Wellington, Hamilton, and Christchurch,  places with high populations and international airports. This  movement won’t impact places like Auckland with its 1.5 million people, in fact they will hardly notice it , but if just 2% of these people decide to move to smaller rural places that will be 30,0000 people, over  half of Whangareis’ current population.
  • Property prices will at worst stay steady during this crisis and most likely will accelerate after it is over. Places like New Zealand, surrounded by water and easily protected, will have huge appeal to all people, Kiwis and foreigners alike.
  • This demand will further accelerate if there is another viral outbreak, and as I have said earlier, this is just a matter of time.
  • Off-setting this is the actual physical ability of people to look at properties. With the lockdown it’s impossible to physically inspect a property. The banks have shut down mortgage processing, the valuers and builders are locked down, LIMS are unavailable, and you can’t shift in or out of a house. Lawyers cant do the Anti money laundering requirements,  so basically the market will stop for the length of time during the shutdown. But once the lockdown is finished there will be a flurry of activity.
  • First home buyer   Kiwi- saver investments have dropped along with the share market, so less first home buyers are able to meet the deposit requirements. This will have little impact on the first home buyer market, because there are so many of them. Kiwi saver was introduced in July 2007. You had to be in it for three years to qualify to use some of the money for a home deposit and the amount you could withdraw maxed out after 5 years. Subsequently for the last 10 years people have qualified and been using their Kiwi saver to help with the deposit. While many have been successful and are in their homes, there is a considerable backlog of qualified first home buyers who have been unable to find a suitable and affordable property. So much so, that the drop off in this market will not be felt. Instead of having fifteen suitably qualified first home buyers per property we may only have seven. The longer you are in the scheme the more deposit you have, so those desperate to buy a house may have wait a bit longer or drop their price bracket a bit,  rather then drop out of the market.
  • Investors will head back into the market in increasing numbers looking for properties below market value. They may have slim pickings. We recently sold a property in Otangarei for $390,000. When I arrived in Whangarei in 1991 you could pick up a property in this suburb for $20,000-$30,000.
  • The Government has been at pains to protect all New Zealanders, both financially and economically. There will be considerable financial pain, but the effects of this are being minimised by the wage’s subsidy and the mortgage holidays and other accommodation.


The Covid 19 virus is only the precursor to other bugs that will develop and try to eat us. Humans are such a big untapped planetary food source. Viruses have been around for a lot longer than we have. It is inevitable that something is going to find a new way to harvest our nutrients. And what better adapted creature than a virus, which can reproduce thousands of times a day, and using our bodies, spread itself through our breathing and social processes. It can mutate faster than we can vaccinate against it. We will have more of these types of bugs coming.

But we will be better prepared for the next one. We know what to do now and how to contain it.

Most of the future bugs will be contained close to where they originated.

Future Economic Changes
  • This virus will have a long-term effect on peoples’ thinking about the way the global economy works. Economies today are dependent on being able to grow internationally. That means they need a growing market to sell into, a worldwide marketplace. We see the evidence of this with all the free trade agreements negotiated in the last 10 years. But are worldwide markets the best strategy for a country?  This virus may be the beginning of a reset where countries look more inside their own borders for growth. 
  • Through necessity people have moved more towards home-based self-sufficiency.  Old fashioned baking is back in vogue as are walks with the family and board games. The home environment has become more important. Isolation and avoiding people outside the family bubble has a new emphasis. People will dine out less and some values such as appearances may change. We will see less waste, such as that generated in the restaurant and dining industry. The green movement will flourish.
  • People will holiday more in their safe havens (NZ) so we will see more internal tourism.
  • NZ will still be seen as the clean green country that it is,  and will still be seen as a tourist destination, but we will need protect our shores better than we have and may not want as many of these risky tourists, many of whom totally ignored the isolation requirements when entering the country. 
  • Tourism as an industry will probably decline and it would be foolish to rely on the tourist dollar like we have. We need to promote New Zealand  to New Zealanders more. We will see the end of the reliance on the tourist dollar and the end of international global travel as we know it, certainly, to the extent it is now.
  • This bug may be the beginning of the end for the current financial system based on economic growth. It is unlikely the existing financial global system, where countries export to each other, will last long term. There is likely to be a movement towards more ecologically sound self-sustaining economic systems. Economies are likely to head internally rather than externally. The export dollar will become less important as it brings so much potential risk with it. This will be short term initially but may gain a stronger foothold going forward, especially among the younger generations.
  • It’s a time the world can reset and head in a slightly different and most likely greener direction.
  • Countries will move towards nationalism rather than globalism. What happens in our back yard will be more important than the worlds backyard.  We will want to be able to lock the gate at any time, with the right people on each side of the fence and have a strong enough internal economy that we can survive without the shocks.
  • We as a country will have a lot of new debt. We will have to pay that back either through our money being worth less, or through taxes. The piper will have to be paid and from what we have heard a lot of this will be by “Quantitative Easing “. Printing money. This should result in some inflation, although it hasn’t yet in countries that have tried it. ( USA, Europe and Japan) , but  never the less it should do!  You print more of it and the value of what is there declines because there is more of it! Seems simple enough. 
  • Which brings us back to property, the only sure fire hedge against inflation. 

Future Economic Changes

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