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New Zealand Info


Antsy
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Just want to know if, like Australia, New Zealand is in the midst of a bubble at the moment. Some relatives are emigrating there and want to buy. However, I will educate them in the correct way if necessary, and with the correct amount of force....

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if, like Australia, New Zealand is in the midst of a bubble at the moment.

Yes.

There is no doubt that we have seen quite strong increases in house prices in New Zealand in the last year or so. Some of that is justified by fundamentals, some simply reflects the fact that, in a small economy, with a small housing stock, it does not take much increase in demand to have a big effect on house prices. But some of the recent increases may also reflect excessive exuberance among some investors.

Thus some people today may be incorrectly convincing themselves that level shifts associated with lower mortgage interest rates are in fact shifts in the trend of prices, that house prices only rise, and that someone can always be found who will pay more for a property. For a time, this behaviour can be price reinforcing, but eventually some unhappy soul will be stuck holding the bag.

There are elements of speculative bubble behaviour present in recent house price developments

http://www.rbnz.govt.nz/speeches/0145812.html

Trying to constrain a growing asset bubble would not be popular, he said, but central bankers were required to makes decisions that were in the public interest.

Are you listening Alan Greenspan?

http://www.rbnz.govt.nz/news/2004/0145824.html

http://www.listener.co.nz/default,715.sm

http://www.synapsis.co.nz/herald/Herald_20...umn_05Jan25.htm

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The NZ bubble is worse than the UK, not because the HP / income ratio is any worse than here, but the Intrest rates are so much higher. The prices there have been at the peak for a while and dont seem to be coming down much, despite IR rises.

A friend of mine bought there last year and now has 2 lodgers to help pay the mortgage.

If you go there having sold up in the UK, you can buy a huge place with the money and of HP do go down, it is only paper money anyway, but if you are a FTB on NZ wages, it is as hard as the UK.

I was born and brought up in NZ, but now live in the UK, mainly because the salaries are so much higher here. Even with the much higher cost of living in the UK, you will always be better of financially here than in NZ.

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