Bernard

Reduced supply won't impact the market for 12 to 18 months from now. We are still getting increased supply at present as the houses and dwellings consented during the boom years of 2006 and 2007 that are finally coming onto the rental market.

It's actually surprising that the combination of the increased supply over recent months together with tighter economic conditions (you would expect more young people to stay at home or look at cheaper accommodation options given the current labour market) has had little or no impact to reduce rents.

Actually most of our own student flats, inner city flats and tidy family homes have shown 20 to 30% (in one case 50%) rent increases over the past three to four years compared to near static rents over the preceding seven years. The market for untidy properties in fringe locations does however seem a little soft at present.

The fact that rents are holding up at present, combined with a decline in supply already in the pipeline and a likely increase in net migration given the horrendous news coming from the US and Europe, all bodes well for property investors despite your highly negative (and most unlikely) outlook on capital prices.

With internal population growth of 40,000PA and a trend towards smaller households due to both an aging population and young people delaying having families we need at least 20 to 25,000 new homes per annum to remain static. Add in 2 to 4,000 homes that are demolished or become redundant each year, throw in an additional 15,000 migrants (hypothetical) for 2010 and consider the current annual construction rate of 12,000 homes - that leaves a deficit of 20,000 homes PA.

That will quickly eat up any current oversupply and create an acute shortage in as little as two years time, possibly setting up another unsustainable boom unless something is done now to get the construction industry moving again.

Unfortunately (for Bernard's predictions) without an oversupply of housing in NZ, like the one that the US, Japan or Europe have, the market is unlikely to capitulate.

These rental figures are the first sign the rental market is still fundamentally in good shape, despite the tide of inexperienced landlords running for the exits dumping good property along with the bad.

Chris j _ I suggest you actually look at migration patterns during the last 4 recessions before claiming that there is ANY evidence for inward migration during times of economic stress. In 3 of the 4 last recessionary events NZ was a net LOSER of PLT migrants (the only exception being the 2001-2003 event.).
If you dont believe me I suggest you go ant look at the governement data on PLT migration and superimpose the relevant recessionary events.

Bernard - surey its time to put this fallacy to bed with an analysis piece ie their is NO support from previous events ( barring post 2001) that NZ gains migrants during global economic turmoil? It is starting to annoy me now that this particular fallacy is trotted out again and again.

Russel - go look at the data. Im not saying this time wont be different, but there sure as hell aint any evidence bar 2001 in the past for this to happen (in fact quite the reverse)......

Here is some of the data

http://www.stats.govt.nz/cmsapp/templates/system/migration.aspx?NRMODE=Published&NRNODEGUID={1294D350-CB84-4249-B49E-527533A8363E}&NRORIGINALURL=%2fanalytical-reports%2ftourism-migration-2000%2ftourism-and-migration-permanent-long-term.htm&NRCACHEHINT=NoModifyGuest#30Years

Now superimpose the, seventies recession, 1980-2 recession, the 1987 market crash, the 1991-1992 recession and the Asian 1997 crash on that graph and tell me that everytime there is an economic crisis NZ gains migrants.........

rbot, I've got friends and family in the UK who have CANCELLED their visits to NZ due to the global recession. The last thing they're going to do right now is spend a fortune moving to or visiting NZ. They're not even going to the pubs at the moment, they're drinking at home instead!

Yes, some Kiwi's will come home and "weather the storm". Yes, some Kiwi's will decide against their "OE" and stay at home for a while longer.

However, we've also got a lot of expats currently in NZ who are going "home" due to cancelled contracts etc... They too would prefer to weather the storm "at home". There are now many potential migrants who can no longer afford the long and expensive trip down-under and we'll miss out there also. We also can't ignore the fact that Australia is still a massive draw on our population of skilled workers due to (still) significantly higher earning potential.

You've got to look at the net impact, and I believe that NZ is on for ultimately losing more people than it gains in 2009. If there is no net-loss, we'll have done well.

Economists and real estate agents are forever saying we will face a supply shortage because of the reduced number of consents being issued. How many new dwellings do we need built each year? Hugh Povlitech says 5-8 per 1000 of current population. I disagree it should be based on future population growth devided by occupation rates + replacement

Replacements can be worked out by the difference between actual census numbers and consents (4000). Occupation rates = occupied dwellings/population (2.72)
This means:

30,000 growth (11,000 + 4000) = 15,000
40,000 growth (15,000 + 4000) = 19,000
50,000 growth (18,000 + 4000) = 22,000
60,000 growth (22,000 + 4000) = 26,000
70,000 growth (26,000 + 4000) = 30,000

So depending on what the population growth is we need to be building between 15-30,000 a year. which we have been doing. I also think population growth will drop this year with negative migration more probable than an increase.

If you look at historic population growth and building consents we have been supplying the market most years except 2002
2001 - 43,000 - 20,000
2002 - 73,000 - 20,000
2003 - 72,000 - 30,000
2004 - 53,000 - 30,500
2005 - 47,000 - 26,000
2006 - 50,000 - 26,000
2007 - 41,000 - 26,000
2008 - 39,000 - 18,500

the average population growth from 1990-2000 was 42,000. Its time the undersupply fallacy was put to bed as well.

There is a lot of bull being put forward by the pro-real estate lobby at the moment about a supposed boom in net migration in the next year
Firstly, in times of recession people tend to stay put on both sides of the world. Yes fewer kiwis will leave to the UK, but conversely fewer poms will sell houses at lower values and risk coming to NZ with employment prospects here grim
Also, if you refer page 7 of this latest Westpac report

http://www.westpac.co.nz/olcontent/olcontent.nsf/content/FM_Weekly_20090316/$FILE/NZWC1603.pdf?Open

you will see that unemployment is not predicted to rise much above 4% in the UK. If this prediction is borne out, there will be comparatively more opportuntiies in the UK than here.

ALso the supposed recent turnaround in net migraiotn figures is distorted by the significant recent gorwth in foreign stduents, a result of the exchange rate turning

SO I think there will only be small net migration gains