Million $ madness

September 8, 2016

Friends took us to an open home on Waiheke Island.

When they told us the price it was expected to sell for my farmer said,”How many stock units could you run on it?”

At the time we were buying a few hundred acres on our farm boundary for less than that house on a quarter acre section.

That was a few years ago. It seemed mad then and it’s got worse.

The average Auckland house now costs $1 million the price of the average house in Queenstown isn’t far behind and the rush to buy is spreading.

I walked past a real estate agent in Oamaru on Tuesday. Three quarters of the posters had  sold stickers across them. Of those still on the market, one house was had an asking price of $200 and something thousand, a couple were selling for $300 and something thousand and the rest were $400,000 plus.

Houses aren’t assets for most people. Unlike productive land they usually cost more than the owners can make from them.

Even if the value of properties is increasing, the owner only realises the gain when they sell and if they are able to buy somewhere else to live which costs less.

So why do we have this million dollar madness?

Demand has outpaced supply.

Solving that requires reducing demand and/or increasing supply.

Capital Gains Taxes haven’t stopped steep price rises elsewhere and Eric Crampton cautions that it’s too early to tell if Vancouver’s tax on foreign buyers has worked and anyone telling you otherwise is trying to sell you something.

If buying a house for eye-popping sums, is silly, what about the $1.35m paid for Colin McCahon’s painting The Canoe Tainui?

The artwork was owned by the late Tim and Sherrah Francis, and was on the market for the first time in 50 years as part of a sale of their extensive private collection last night.

They bought the painting in 1969 for $500 and took it with them on their diplomatic postings around the world. . . 

Paying so much for it now might look like million dollar madness.

But only time will tell if it’s a good investment and that might not be what motivated the buyer anyway. Not everyone who can afford fine art is looking to make money from it, sometimes the beauty of the buy is enough in the eye of the purchaser.

 

 

 

 


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