NZ Real Estate- Tony Alexander and Mary Holm

In a recent newsletter, Alexander wrote rather colourfully about young home buyers "having to realise that after a lifetime (for them) of easy credit access to consumer goods and services, the reality of struggling as previous generations have done is simply manifesting itself.
"They may have to live further away from their work than they want, as some are doing by buying in Featherston and working in Wellington."
With work available outside big cities, "The route toward home ownership for the easy credit generation seems logically to be buying and working in the regions.
"After all, how many times have we heard people say you'll get a coffee in the regions as good as, if not better than, what gets served up in the cities - plus better access to the outdoors, less vehicle pollution, and less road congestion.
"Eventually you'll build up enough housing equity to help fund a house purchase in a city further down the track if one wants to pursue a career in a bigger smoke."
Would-be home buyers might also have to consider "cutting down on the cellphone use to limit the monthly bills, cutting foreign travel, putting off getting a modern car, plasma TV, latest gaming console, latest phone, and cutting 20 $3.50 cups of coffee a week until after the deposit is raised for a house," says Alexander.
He adds, in brackets, "(Written by one who spent the first six months after purchasing a tiny house in 1987 getting four hours of sun a day in winter, sleeping on the couch for want of a bed - with an 18.5 per cent interest rate. Fade to Four Yorkshiremen skit.) That wonderful Monty Python skit featured four old men competing with one another for having had the toughest childhood.

Q. Thanks for your cool-headed analysis of the housing market. As a recent immigrant from California, I am astounded by the real estate mania that has set in throughout the country - from endless TV shows, newspaper inserts, etc.
My favourite bubble sign is the supposedly desirable neighbourhoods whose commercial centres are chock full of real estate agencies (think Mt Albert).
In California I had the first hand opportunity to witness a mania. Conversations were littered with fallacies:
* If you don't buy now, you'll be priced out of the market.
* Real estate only goes up in California.
* If it doesn't go up, it will just plateau.
* If you rent you're throwing your money away.
By the way I love the "property ladder" saying in New Zealand. It essentially summarises all the misconceived notions about real estate.
If you haven't already seen this, I highly recommend the blog http://thehousingbubbleblog.com It has documented the spectacular rise and the beginning of the fall of the market in the United States.
PS. Happily renting for about half the price.

A. The blog looks interesting. But I bet many readers won't look at it. They don't want to know.
Funnily enough, in the article I quote above, the BNZ's Tony Alexander says "house prices might be exactly where they should be".
His reasons include: higher immigration; lower and less volatile interest rates than in the past; strong job security; and high construction costs.
He concludes that it's "very unlikely" that house prices will fall sharply.
On the other hand, we keep being told that house prices are at record levels, relative to rents and incomes. And that more and more people can't afford their own homes - even if they will settle for west of Avondale or down country. That all suggests downward pressure on prices.
To be honest, I don't know what to make of it. Like you, though, I could never have the blind faith in property that some New Zealanders have. How quickly they have forgotten house price falls in the 1990s. And how reluctant they are to take note of bigger falls in other countries.