House prices versus fundamentals 0 50 100 150 200 250 300 350 400 450 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 N ZD (000) 0 50 100 150 200 250 300 350 400 450 N ZD (000) InvestorValue Actualm edian price S ource: R EIN Z, RB NZ, Stats N Z, W estpac
Chamber Housing March 09
Jul 23, 2015
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House prices versus fundamentals
0
50
100
150
200
250
300
350
400
450
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
NZD (000)
0
50
100
150
200
250
300
350
400
450NZD (000)
Investor Value
Actual median price
Source: REINZ, RBNZ, Stats NZ, Westpac
Buy so long as:
Rent(1-t) + Price*πe ≥ Price(i+f)(1-t)
Maximum price investor willing to pay:
Price = Rent(1-t) / ( (i+f)(1-t) - πe )
Investor housing valuation
t = marginal tax rate
πe = long run expected capital gain
i = mortgage interest rate
f = other costs
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