The Dim-Post

July 30, 2009

Coq au vin

Filed under: finance — danylmc @ 3:25 pm

How did I become so middle class? I read stories about house prices and I just bought a slow cooker.

Reflecting on the price rise predictions I realise I owe an enormous debt of gratitude to Bernard Hickey. At the end of last year Hickey was ubiquitous in the media, frantically warning people get out of the property market because values were going to fall by 30% and not recover for another ten years:

It is a debt death spiral that can only stop when asset values stop falling or capital has been replenished with enough cash. Essentially, this is the de-leveraging tsunami that sucks debt out of the property market and then destroys the value of that property.

So following the ‘always do the opposite of what Time Magazine recommends‘ principle I figured it would be a good time to buy. There were a lot of houses for sale, almost all of them belonging to panicked property investors and virtually nobody was buying – because by this stage everyone ‘knew’ prices were going to fall by another 30%. We got our place for about 15% below GV, six months on similar houses in our neighbourhood seem to be going for about 5% over GV.

I see Bernard Hickey has recently walked back from his dire predictions but I’m incredibly grateful to him for making them, the poor guy who sold me my house (a professional fund manager, natch) probably less so. The slow-cooker now occupies a place of pride in my new kitchen. I’m making coq au vin this weekend.

The new place isn’t perfect – there’s no insulation – and it seems impossible that I haven’t blogged about heating or insulation yet since in the real world it’s all I’ve been able to talk about for several months now. So at some stage I’ll have to write up a long, intensely boring spiel about insulation materials and energy efficient heating.

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23 Comments »

  1. Please.

    The eco-insulation guys came round and recommended a type of spun recycled polyester for underfloor. Is this really better than wool? What to do…

    Comment by Sally — July 30, 2009 @ 3:55 pm

  2. Fantastic and well done, its been a great time to buy as they say “its always darkest before dawn” .
    Its a funny old blog with half a dozen Hickey disciples calling for anyone who invests in property to be treated with the same approbrium as Weatherston.
    At least Bernard has admitted he was completely wrong, the rest of them havent caught up with their Messiahs new thinking yet.

    Comment by David — July 30, 2009 @ 3:59 pm

  3. I think Hickey’s problem is that he thinks people are sane. He’s too rational sometimes.

    The market is still considerably overvalued, but that won’t stop people buying, or the money changers at the temple from trying to push up the market again.

    Comment by George — July 30, 2009 @ 4:04 pm

  4. Where else are people going to put their money? The share market? A finance company? A bank deposit at close to 0% interest? I’ve heard Hickey explaining finance and economics on National Radio a couple of times and he’s REALLY good at putting out fairly complex concepts in simple words; making predictions and recommending policies not so much.

    Comment by danylmc — July 30, 2009 @ 4:15 pm

  5. You may enjoy today’s xkcd: http://xkcd.com/616/

    Comment by GarethW — July 30, 2009 @ 4:20 pm

  6. House? Insulation? Coq au Vin? You’ll be voting National next ;)

    Comment by MarkS — July 30, 2009 @ 4:22 pm

  7. Where else are people going to put their money?

    If we had an economy that actually worked, as opposed to a dairy company and a housing bubble… the speculative investor might consider that the capital gains taxes on housing or financial products were a disincentive and also have the option of investing it into a productive company. That is of course what share-markets were supposed to do, but that function is now almost vestigal – they’re a pump for generating more money from nowhere.

    Comment by George — July 30, 2009 @ 4:29 pm

  8. Glad to be of service…I think.
    I assumed the market would return to rationality. It didn’t and won’t until New Zealand is forced back to reality by the people we owe money to.
    cheers
    Bernard

    Comment by Bernard Hickey — July 30, 2009 @ 5:56 pm

  9. Wool, Wool, Wool

    There’s houses in Aussie that had the walls packed with wool for insulation 160 years ago. No shrinkage, still in pristine condition.

    The NZ Wool insulation has about 5% poly in the blend and, of course, no laminum(?)and is about a $1 a sq metre more but the strange satisfaction of feeling like you live inside a woolly jumper is well worth the extra cost. Buy online and install yourself. It tears like paper. Can’t recommend it enough. Don’t know if it comes under the subsidy though.

    I loved the way Bomber became a follower of Bernard so that he could tout the coming armageddon. Strangely he’s gone quiet on that front recently and ratcheted up blog comment security to Condition Red.

    Gareth xkcd rocks

    Comment by singularian — July 30, 2009 @ 6:31 pm

  10. Slow cookers are the greatest, this lady used hers everyday for a year!

    Sometimes its OK to middle class, with or without insulation :)

    I sent the wife on a cheese making course and know we have more feta and home made chutneys than I could ever consume…

    http://www.makecheese.co.nz/

    http://www.cheesemaking.co.nz/index.php/cheesemaking-workshops-and-courses

    Comment by andy — July 30, 2009 @ 6:36 pm

  11. A cat on the lap is a perfectly acceptable middle class heating solution. I look forward to your cat blogging.

    Comment by mjl — July 30, 2009 @ 6:44 pm

  12. “I assumed the market would return to rationality.”

    ah, people are acting rationally, you just make poor predictions. Houses are good investments that many NZs can get into and as rational beings making money, as opposed to being eaten by sharks in share market, is a rational thing to do.

    Comment by neil — July 30, 2009 @ 7:34 pm

  13. yeah, we’ve done the same thing, and will likely put our savings into a place in january.

    the difference to what we’re doing, and what the average buyer seems to do, is that we’re buying the smallest place we can tolerate, not the biggest we can afford.

    the intent is to make sure we have wiggle room for when rates shoot up again. we’re going to spend on the mortgage in the first few years like we’re paying off a more expensive house, and when it does become expensive we won’t be under stress.

    means cutting back on the boys’ toys, but hey, wtf. at least i get a BBQ!! the first mission is making hot-smoked bacon. (will put progress up on the blog)

    Comment by Che Tibby — July 30, 2009 @ 7:55 pm

  14. I assumed the market would return to rationality.

    The market can stay irrational longer than you can stay solvent – J M Keynes

    Comment by danylmc — July 30, 2009 @ 7:58 pm

  15. Heh. I used similar thinking when I predicted back on February 3 that the global financial crisis would be over this year, maybe as early as September, and that 2010 would be a great year economically.

    So it is precisely because every economist in the world is predicting gloom and doom that I’m now going the other way. What’s more, I’m extremely confident, because I have never before seem such an extraordinary consensus of economists. That makes it an iron-clad certainty … that they will all be wrong. It’s as certain as the law of gravity. 2010 will be a great year.

    http://vibenna.wordpress.com/2009/02/03/as-certain-as-death-and-taxes/

    Comment by vibenna — July 31, 2009 @ 12:23 am

  16. “and will likely put our savings into a place in january.”
    Che, you may find that not many folk sell in January. They are busy with holidays, children on holidays, or tidying up their properties while on holiday, ready for selling when the real estate agents are back from holiday in February. But all good things come to those who wait, even people who earn the scorn of unionists!

    Comment by Clunking Fist — July 31, 2009 @ 7:50 am

  17. nah, we’ve already sorted out the deal. the people living there don’t move till then.

    in the meantime i’m resenting that my current rent is higher than the minimum mortgage repayment…

    Comment by Che Tibby — July 31, 2009 @ 8:02 am

  18. I, too, after some hesitation, am diving into the market. I decided it was better to pay money into a mortgage than into rent, especially as I will be wherever I am for at least 5 years, more likely 10.

    And I, too, wonder about the lack of insulation in NZ houses. When my ex and I first arrived in NZ, we bought a house, and immediately set about replacing all the windows with double glazing. Saved lots in heating bills, warmer, quieter, etc. Also put pink batts in the roof, foil underfloor. Cosy. I just hope I can find a good place in my search. So far, I have seen a LOT of places with single pane windows, etc.

    As for slow cookers: Had one for years. I get rave reviews for my slow cook shanks (lamb or venison). :-D

    Cheers
    David

    Comment by David in Chch — July 31, 2009 @ 11:17 am

  19. Che, sweet. But is your current rent higher than the minimum mortgage repayments PLUS rates PLUS insurance PLUS maintenance?
    (okay, okay, LESS the value of the pure joy in owning your own place LESS the discounted value of not having to pay rent when you have only the national super coming in.)

    Looking forward to you becoming more middle class and reactionary once you become part of the property owning elite!

    ;^)

    Comment by Clunking Fist — July 31, 2009 @ 1:25 pm

  20. have well and truly crunched the numbers on this one. maintenance is the kicker, but the building inspection says the place is in decent knick. the parts that are falling over we’re planning to demolish first.

    then build a peoples centre. maybe a retreat for disillusioned socialists. all welcome!

    - except chris trotter.

    Comment by Che Tibby — July 31, 2009 @ 2:14 pm

  21. we bought our place about 2 yrs before the market peaked so we’re probably not sitting on negative equity at the moment. but we did lock in a two yr fixed term at the begining of last year when we strong-armed the bank down to 9.15%.

    Comment by Neil — July 31, 2009 @ 2:25 pm

  22. but we did lock in a two yr fixed term at the begining of last year when we strong-armed the bank down to 9.15%.

    So, just to get this straight, you fixed for two years at the beginning of ’08?
    Yeah, I bet the bank was terrified they might lose out…

    http://www.rbnz.govt.nz/keygraphs/Fig3b.html

    Comment by Phil (not Goff) — July 31, 2009 @ 4:39 pm

  23. I would have thought Chris was a unreformed socialist rather than a disillusioned socialist!

    Comment by Clunking Fist — July 31, 2009 @ 5:01 pm


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