Housing Plunge at Tipping Point

With the latest collapse of another large scale housing project some ‘investors’ in speculative housing must surely be starting to face up to reality.

This has been coming for a while, anyone with some common sense and a lot of highly qualified and impartial people have been saying for a few years now a housing crash was going to come. People who have been completely (almost willfully) blinded by dubious promises of obviously risky high rates of return, high (subsidised) rents and lavish housing with stellar promises of unlimited riches and cash flows have been willing to bury their heads very deeply into the sand over the impending train wreck. 

It is impossible to feel sorry for anyone involved in this business. If any of the investors had bothered to pick up a reputable newspaper and get past the real estate section and read what economists and other business commentators have been saying, they would have been pulling their money out earlier or not even bothered in the first place. Anyone who really put any stock in developers promises of high rentals for fixed terms, when it was obvious rental returns were dropping and they were propping up the rents, was an idiot. That people trusted real estate agents and housing developers at their word is just bizarre, and it can only put down to greed.

When one of the ‘victims’ of the collapsed Kensington Park development called on the government to protect the “little guy” from being ripped off by developers. WTF, you want the government (tax payers) to protect you from your own financial stupidity??? I suspect what he meant was that he wanted to be able to make high risk investments with his cash, but the tax payer to bail him out when he made a dumb decision. Not one MSM reporter questioned this moron about what he expected the ‘government’ to do and why he’d not been taking on board the risks involved in this investment.

The ‘funny’ thing about all this is that we probably haven’t seen the worst of it. Yes folks, it’s going to get worse. Here’s why…

All the people with LAQC’s and highly leveraged ‘rental property portfolios’ have been trying to sell off some of their properties over the last 6 – 12 months as interest rates bite and the gloss has come off the reality of having huge amounts of debt. Real Estate agents are then suggesting that they rent them out for a bit and then try again in the summer, because things will have picked up by then… quite how and why things will have picked up by January is not really clear, because the fundamentals won’t have changed a bit, in fact they have got worse as the continued bank and insurance company collapses continue.

Come January these ‘investors’ will be in deep trouble, having tided themselves over with rents that don’t cover the mortgage and using their credit cards and any other method to prop themselves up, they will be deeper into debt and the relief they are hoping for won’t be there, at that point there is going to be a lemming like rush. Your already starting to see it with the increaseing number of Auctions (mortagee sales) appearing, as these properties sell off cheap, this will affect the neighbouring properties as potential buyers (the few that there are and who can actually get finance) simply look at the latest sales and base offers on this, as this drops the prices further panic will set in as investors see their financial position worsening by the week.

At some point it will all reach a tipping point as people bite the bullet and start to accept losses as they bail out, or Banks make the decision for them and force sales. 

The days of the 100% mortgage and no docs mortgages that a year ago were easy to come by and financed the housing bubble have gone, completely. There is no more money around to finance a pick up in housing because the money that kicked the latest boom up was all borrowed in the first place, and the big lenders overseas are going bust or pulling up the draw bridges.

Personally I reckon by January things will have tipped over completely and the fallout will continue through next year and possibly beyond. There will be a lot of half finished housing developments around as contractors demand payments and go under, investors panic and a lot of people go broke.

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    • 5 years for veitch (at least)
    • September 26th, 2008

    Well, you see, I am back. Unfortunately, you at consumeist have not bothered to post anything interesting regarding that backward retard that beats his girlfriends – the cowardly Tony Veitch which makes me less than interested in posting comments. Hopefully, there will be some good news regarding the outcome of this horrendous human being’s trial and conviction and sentencing.

    I really wish I was in New Zealand just so I could find him at some pub and ask him a few questions about his attacking a defenseless woman. Living in Texas, I have come to appreciate the laws regarding firearms and if that scumbag tried his sh*t over here I would laugh happily as some Texas gal popped a cap in his ass. I guess now the only caps that will be popped in his ass will be during his prison stay – which we should all hope for.

    Regardless, my post here is actually (believe it or not) about the NZ property market.

    I know that many foreign investors have purchased property in NZ and with all the expats returning home with their british pounds, NZ property has done well.

    I believe, though, that this downward spiral of NZ property prices has more to do with archaic interfering laws governing the transfer of property, dodgy builders that scare off purchasers, and of course I cant help but think the Labour government has had their hand in the downfall of NZ as a whole (certainly from a law and order perspective).

    Thanks for letting me rant.

    Have a great day!

  1. Hell, you’re going soft!

    Only five years??? I’d been hoping for a bit longer than that although I can see he’d probably be off for good behaviour early, but not before some of the bro’s had given him a bit of prison ‘action’…

    I agree about the property laws having some affect, however a lot of it is just very loose borrowing policies from banks, and, well, just simple greed from investors not looking hard at the risks involved with high returns.

    I’ll be doing some updates on Vichy as soon as it makes it too court.

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