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Housing market activity to lift, values to level off as more move to sell in early 2010, QV says
January 10th, 2010
Government valuation agency QV is picking activity in the housing market will lift during the first few months of 2010 as owners who held off selling in 2009 decide to enter the market. An increase in sellers tempted in by higher prices should then see a leveling off in values, QV said.
The forecast comes as QV’s latest market report shows nationwide house values increased further in December to 4.9% below their 2007 peak, from 5.9% below in November. It also follows figures from Auckland’s largest real estate agency, Barfoot & Thompson, which showed its average sale price hit a two year high in December.
The main centres led the way for improving house values over 2009, with urban values rising 6.5% from their April low to sit just 3.9% below the 2007 peak, QV said. Lagging behind were provincial values, up 3.2% from their low and still 7.7% from their peak, and rural values, up 1.3% in a late rally to sit 6.5% below their peak.
“We expect that sales activity will lift in the first few months of 2010 as owners who held off in 2009 decide to move,” QV Valuation Manager Glenda Whitehead said.
“If the increase in values in the main centres is being driven by a lack of properties for sale, (then) an increase in sellers tempted to the market by the improved prices should see a levelling off in values. However, there still remains debate about whether the current listing shortage is actually driving up values or rather there is actually an underlying shortage of houses in the main centres – that debate will no doubt continue,” Whitehead said.
Here is the full release from QV:
According to the latest residential price movement index released by QV, New Zealand house values rose 2.8 percent over 2009, and are now only 4.9 percent below the peak of the market. The average sales price also rose to $404,671. This ends a year that showed a dramatic and somewhat unexpected level of turnaround in house values.
After reaching their peak in late 2007, house values dropped steadily throughout 2008. At the beginning of 2009 two camps developed – those that considered the market had much further to fall, and those that considered it was near the bottom, and perhaps heading toward a good time to buy.
“The property market is strongly influenced by consumer confidence, and while in late 2008 there was much negative sentiment, and New Zealand was in the grip of a recession, bank lending had tightened considerably, and many home owners had seen the value of their property decrease rapidly over the preceding year, as consumer confidence began to grow in 2009, so did property values in the main centres” said QV Valuation Manager Glenda Whitehead.
“In the early months of 2009 with interest rates at their lowest level for many years, scores of home owners took the opportunity to refinance their existing loans and shelved any plans to move in the short term. At the same time, potential buyers were holding back in the expectation that values would drop further, although many were tempted back into the market by the low interest rates. Mortgagee and distressed sales were also seriously impacting on the market” said Whitehead.
By April 2009 nationwide house values stopped declining, having fallen to 9.6 percent below the market peak. Confidence was steadily improving, as signs emerged of the recession ending, and in the main centres old listing stock was cleared. The February to May period saw a dramatic change in the attitude toward residential property in the main centres. The same cannot be said of the regional markets which remained subdued. Values began to increase again, especially in the main centres, driven by a relative shortage of properties listed for sale as the year progressed. Banks’ lending criteria also eased somewhat later in the year.
Driven by the main centres, nationwide values rose 5.1 percent between April and the end of the year to finish 4.9 percent below the market peak. Within this the main urban areas increased 6.5 percent since April and now sit just 3.9 percent below their peak of 2007.
Values in the Auckland Area rose 5.1 percent during 2009, the Wellington Area and Christchurch both rose 4.6 percent, and Dunedin rose 4.9 percent. Hamilton grew only 1.8 percent and Tauranga ended the year with an increase of 0.1 percent.
Whitehead said “while the numbers look somewhat dramatic, and there were calls in the market place of a pending boom, the market continued to be subdued by low stock levels in the main centres, and the continued cautionary nature of bank lending”.
“Despite house values increasing again, the volume of house sales during 2009 was still at similar levels to when the market was last stagnant in 1998 to 2001 period, and in 2009 were only around two thirds of the levels seen during the boom” said Whitehead.
Provincial centres saw a less pronounced rise in house values during 2009, increasing 3.2 percent from the low early in 2009 to now be 7.7 percent below their peak. The value of houses in rural areas remained relatively static for most of the year, but a rally late in the year led to values increasing 1.3 percent since early 2009 to now be 6.5 percent below the market peak.
There was more variation between provincial centres. Whangarei at -5.2 percent and Gisborne at 5.6 percent both ended the year lower than they started. Rotorua at 0.4 percent, Hastings at 0.2 and Queenstown Lakes at -1.9 percent all finished the year more or less level. New Plymouth at 7.1 percent, Palmerston North at 3.3 percent, Nelson at 3.1 percent and Invercargill at 3.2 percent all showed growth in values.
“Residential property values in provincial and rural areas did not increase as strongly as the main urban areas. Reports indicated that listings were more abundant in these areas, with demand lower due to localised economic factors such as closures of local industries and subdued earnings for the rural sector dampening confidence. There are now signs of confidence returning to the provincial markets, with activity in more recent months showing value increases” said Whitehead.
“Market activity also saw a significant change during 2009 with a progressive shift towards relatively more sales activity in the bottom half of the market and relatively less in the top half of the market. This reverses the trend seen during 2008 when activity in the bottom half of the market declined significantly” said Whitehead.
“Improving confidence is also reflected in the turnaround in the number of new dwelling building consents and vacant residential land sales. While both dropped significantly throughout 2008, vacant land sales dropped dramatically to be by far the lowest year since 1980 when our records began. Both measures trended upwards during 2009 with consents now at around two thirds of peak levels, and vacant land sales at around the same levels seen in previous property market lows” said Whitehead.
“As the market fell, it simply did not make economic sense to purchase vacant land and build a house on it. Furthermore, finance became much harder to secure, particularly for speculative developments. The slight recovery in 2009 is fuelled by building to meet genuine demand. There is, however, a long way to go before this part of the market returns to levels seen previously” said Whitehead.
Whitehead said “2009 did not bring the continued correction to property values that many were expecting, but Housing Affordability did improve for a short time while values had dropped and interest rates had reached their low. There has been a strong flight to quality over the past year, and a return to many fundamental investment principles. The market again recognises that property ownership does come with risks”.
“The improvement in market conditions is on the back of lower interest rates, improved consumer confidence, an improving employment situation and no doubt the old kiwi adage that residential property is a good long term investment, as it is better understood by many than the alternative investment products” said Whitehead.
So what will the housing market do in 2010? “We expect that sales activity will lift in the first few months of 2010 as owners who held off in 2009 decide to move. If the increase in values in the main centres is being driven by a lack of properties for sale, therefore an increase in sellers tempted to the market by the improved prices should see a levelling off in values. However, there still remains debate about whether the current listing shortage is actually driving up values or rather there is actually an underlying shortage of houses in the main centres – that debate will no doubt continue” said Whitehead.
“The future continues to hold uncertainty and risk, and that risk is being priced into the market by sellers, buyers, investors and most certainly lenders. A cautionary tone still prevails in the market. Given the wider economic conditions we expect values to increase slightly throughout 2010, but not at the same rate as we have seen in recent months” said Whitehead. “If the rebound in values were to continue at the present rate we will all too quickly regain ground lost since the peak in 2007, when the market was considered overpriced and highly unaffordable” she said.
Tags: Glenda Whitehead, House prices, house sales, house values, Quoteable Value, QV
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January 11th, 2010 at 6:41 am
Up up and away the prices go! Can’t argue with QV figures, they are more reliable than B & T.
January 11th, 2010 at 7:16 am
Why invest in productive export entities when you have a govt guaranteed property pathway to fatter returns and who gives a rats arse that young families cannot afford a home of their own to raise their children in. That’s about right isn’t it Bill English..and you John Key!.
January 11th, 2010 at 7:37 am
I agree with you Wally
Our company has been manufacturing for 50 years. 60% is exported.Less than 10 employees.Time to close the factory and import from China . Invest the profit in housing..
January 11th, 2010 at 8:13 am
The Noddyland bubble economy is now 99.999% dependent on the quality and quantity of spin. The govt has decided there is a need for a Ministry of Propaganda and expects great things to come from it. The Prime Minister has said he will appoint a new Minster to the new department and is looking forward to being, as mislead about the truth of what is rotten about the economy, as any other person.
January 11th, 2010 at 8:36 am
All you Chinese bulls better watch out, you better read this. Its well worth your time.
http://www.pivotcapital.com/reports/Chinas_Investment_Boom_the_Great_Leap_into_the_Unknown.pdf
January 11th, 2010 at 8:52 am
Guys please read it carefully. The house price is still 5% lower then 2007. Don’t buy houses in 2010.
January 11th, 2010 at 9:25 am
Joe, QV figures lag few months behind REINZ figures due to way they calculate it. In reality prices are already higher.
January 11th, 2010 at 9:39 am
@wally – maybe you should try contacting the World Bank direct? No point going on about our local politicians – what have the admins got to do with the price of fish?
January 11th, 2010 at 9:42 am
as usual people are falling for the broad brushstroke.
i’ve just seen the QV figures breakdown for every town and city in our fair country.
auckland and the other mains are definitely up but e.g. hibiscus coast on the edge of AK are as follows:
2009 prop.value growth…….+0.1
Nov. prop. value growth…….- 2%
2009 average price $486,776 which is as above a nominal growth
also 80% of the housing mkt is made up of people who ALREADY OWN THEIR OWN HOMES.
due to the recession etc most of these people have remained still, creating a listing vaccum so supply and demand is driving the agenda in the bigger cities but the regions THROUGHOUT NZ tell a very different story!!.
the side effect of improving economic conditions is that the cogs will start turning again in that 80% quotient , as people transfer, move to Aust, upgrade etc.
the moral of the story is don’t be sucked in by national figures…relate it to where you want to live and if you have no immediate need then higher interest rates etc in 2010 plus Govt. moves to tax will keep Mr Market under control.
have faith , elves, have faith !
January 11th, 2010 at 9:48 am
Yes, a slowdown in China would be the death of many overleveraged in Noddyland. Nice way to start the week AndrewJ. It really is a case of where to hide ones capital first and last. Selling out of the China story just brings another problem to the top of the deck. Where to invest the loot!. Maybe I should ask the local Real Estate agents for their guidance and advice!
January 11th, 2010 at 9:49 am
Setting up nicely for the new tax laws coupled with higher interest rates to knock it back down again ala 1998-2001. Still too soon to buy, property cycles are long, patients is rewarded
January 11th, 2010 at 9:58 am
@Macca – the property market is not a warehouse full of homogeneous prices. Get in now and NEGOTIATE. What have you got to lose? The people who wait are the ones are I can’t talk to anymore about my rental properties because they get bitter and sad.
Work out your figures and just do it man! Interest rates are rising. That means inflation is rising. Prices don’t go down. Money is devaluing right now and you need more and more of it to buy property. So get in there, do the hard work and good luck!
January 11th, 2010 at 9:59 am
If you look at property from the basic view point of cap gains being greater than the cost of finance (interest rates) then big money’s not going to be seen from PI anytime soon.
Remember OCR is at an all time LOW. You will never see (artificial) govt. measures helping property prices to this extent again for a very long time (and have never in past..).
So prices have had to move up (look at OCR drops in late 90’s and the rebound the same as we are having now, and those cuts were nowhere near as big as current).
May be a case of Indian giving though as Govt tax changes take back all of the price increases caused by low OCR
January 11th, 2010 at 10:11 am
@John S: Yes bank interest rates are rising but not because of inflation (you’l see OCR, our inflation controller, has not moved at all yet). Banks cost of getting money has gone up, and globally the easy credit is no longer so easy… So bank interest rates relative to inflation (i.e REAL interest rates) are, and are going to continue to be much higher in the future.
Too many unkowns that only have potential downside to property prices at present, and the majority of home buyers don’t consider them (and RE agents, banks dont want you to know about them) so none are being priced into the market. The unknowns (that I know of):
-Tax changes
-Basel III almost certain to demand higher capital held by banks
-Degree of interest rate hikes
January 11th, 2010 at 10:17 am
For a counter view to AndrewJ’s link , try the weekly Leeb report : http://www.leeb.com/content/weekly-update-11-23-09
January 11th, 2010 at 10:31 am
Mecca, you missed most important point, you don’t owe a house and can’t afford one!
January 11th, 2010 at 10:49 am
I own a family home but no investment property yet. Probably not the most important point I wouldnt have thought…
January 11th, 2010 at 10:56 am
@ Macca – I hear what you say. However I still look at it liek this:
“Too many unknowns that only have potential downside to property prices at present”
=
Great negotiation ammo for a cheap house.
January 11th, 2010 at 11:02 am
That Leeb report sounds unsure of itself. Not the strongest rebuttal.
January 11th, 2010 at 11:33 am
@Barryp :
It is quite likely I rent from someone like you. Your renting to me at below the full finance costs of your property. Surely once the LAQC loophole is closed you will have to find another way to “make” money.
The reality is I could easily buy the property I rent with my cash reserves without borrowing a cent from a bank. Why don’t I buy? Firstly it would make my finances less liquid, and also significantly reduce the return I make from my investments. And secondly, now is simply not a good time to buy. Last year would have been a little better.
Why buy when you rent at somebody elses expense?
January 11th, 2010 at 11:39 am
Bruce
I suspect any tax changes to the detriment of property investors will place upward pressure on rents.
January 11th, 2010 at 11:51 am
But where is that money going to come from andrew? Unless salaries go up to cover the increases, all that will do is create even more pressure for a massive correction to happen. If rents are expenses that tenants can’t avoid, or avoid paying more, then it reduces their disposable income, which in turn has greater impacts on the economy, and ends up driving the whole thing down the gurgler much faster.
The house market has to come back or the country will be stuck with no growth, while everywhere else either defaults or inflates out of the debt. Its going to be very messy no matter what happens though.
January 11th, 2010 at 11:58 am
exactly, Brodie…the big problem in this country is the very low financial literacy of the average home buyer ( and fair enough) with most people driven by BBQ talk by the ill-informed.
every fundamental points towards housing not being able to experience a boom even if it wants too.
core funding ratio for banks, interest rates..the list goes on…govt.intervention etc etc .
the ” more fool” theory is the only thing sustaining anything and buggar living on shifting,whispering sands, i say!
i sold at the peak in 2006 and am renting with intesrst from my ex- house money paying my rent…you gotta know when to hold ‘em ,know when to fold ‘em…i’m holding!
January 11th, 2010 at 12:02 pm
http://www.moneymorning.com.au/
clcik this link from australia re housing statistics…very insightful….
January 11th, 2010 at 12:04 pm
If rent increase I will organise people to protest in front of beehive. The rent is already very high.
January 11th, 2010 at 12:09 pm
Good points Rob of the north
Unfortunately the NZ/Auckland property doesn’t follow any fundamentals
I suspect your peak of 2006 will be surpassed this year
I have my rentals I bought at the end of 2008 and fixed for 5 years in FEB 2009 at 6.5%…I’m happy…but I’m not prepared to load up on any more $$$$debt. Increasing profits and debt reduction are my goals for the next 12 months.
Bruce I hope you don’t have all your cash reserves in just bank deposits or bonds, when interest rates go up and inflation rises your money will be eaten away
regards
January 11th, 2010 at 12:10 pm
@Rob:
Didn’t you already fold them? Now the stakes have increased and people like Barryp are still at the table with at best a low pair, all the while the government is holding all the aces. It’s only a matter of time till they lose everything.
January 11th, 2010 at 12:17 pm
by ” hold ‘ em ” i meant wait, rather than follow the leader and buy now when i don’t beileve there’s any particular urgency…….mistakes are the only things we can truly call our own so we shall see!?
January 11th, 2010 at 12:21 pm
from todays Herald….see what i mean about uninformed opinion?
“Housing market set to boom”
Nicole Kidman best actor of the decade
Moulin Rouge voted best film of decade
Moulin Rouge! has been voted Best Film of the Decade.
Moulin Rouge! has been voted Best Film of the Decade.
The 2001 musical – which starred Ewan McGregor and Nicole Kidman and was directed by Baz Luhrmann – topped a survey of 150,000 movie fans, narrowly beating Batman epic The Dark Knight and British zombie spoof Shaun of the Dead into second and third place respectively.
January 11th, 2010 at 12:23 pm
Holiday here in NZ: Grand- Parents (BB) are sitting in front of their swimming pools, talking & playing with calculators again thinking about making profits on properties only, while their poor grand- kids are drowning – an idyllic picture.
Stop the expansion/ attraction of the gigantic Property & Real Estate industry ! Start productivity/ manufacturing.
Walter
January 11th, 2010 at 12:47 pm
housing is knackered. I dont know when but it is. We live in a one game town and the games up
I like Greg Pytels take on it
http://gregpytel.blogspot.com/2009/04/largest-heist-in-history.html
January 11th, 2010 at 12:51 pm
Andrewj and Roger – your 8.36am 10.17am, useful articles on China. Just not cricket, eh.
My question is, where do they get their money from?
I wonder how they’d pay for these turbines:
Sea to provide power for 250,000 homes
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10619466
If only we understood, and accepted, how they play this game we still call cricket.
Cheers, Les.
January 11th, 2010 at 12:54 pm
I should have added this link to my last posting
http://www.stuff.co.nz/business/industries/3218659/Union-urges-Govt-to-clamp-down-on-banks
January 11th, 2010 at 1:23 pm
Bruce, I will pass on any extra cost to you.
Fine with me, why rent when you can buy, and get someone else to pay of your mortage.
January 11th, 2010 at 1:28 pm
Do Finsec believe that the banks are a free public service , and that they owe the employees a living . ………… Which planet are Finsec on ?
Les check my TOP 10 @ 10 ( Basle ) . Gotcha turbines & other goodies , in lieu of Hickey enthralling us with tales from the twilight zone , Osrtrailer .
January 11th, 2010 at 1:38 pm
28_year_old: Unfortunately the NZ/Auckland property doesn’t follow any fundamentals
Everything follows fundamentals. Sometimes its just a matter of time (fundamentals catch up … or the price changes. Sometimes you just don’t understand the fundamentals being followed. Rarely, the fundamentals change).
Why do people persist with the “paying off someone else’s mortgage” line as well? All that shows me is that you can’t work a spreadsheet – with fairly stable rents and without capital gain, it doesn’t matter whose paying whose mortgage, its arguably better to rent with today’s prices / interest rates.
Also to Barryp —-> why don’t you charge more rent now? Surely you are already extracting the maximum rent possible from your tenants? They won’t care if you have higher costs or worse economics. If its lower socio-economic housing, if they can’t afford it, you won’t get it.
January 11th, 2010 at 1:41 pm
Ian C That may be the case today but over the long run (20-30 years ) id rather own.
January 11th, 2010 at 1:48 pm
Because you want to own a house, or because you think its a better investment proposition, based on today’s prices?
January 11th, 2010 at 1:56 pm
A bit off topic, but any points of view please.
How likely is this scenario?
1) Capital gains/ land tax introduced
2) Landlords increase rent to cut losses
3) Beneficiaries can’t pay
3a lose housing – or increase density of living
3b WINZ pays more for rent (from tax revenue)
I currently have a WINZ tenant, for which the rent is paid 100% by WINZ.
Or is this insignificant or the tax benefits outweigh any “new costs” to the Government?
Will Government need to look at increasing it’s housing policies? i.e. look at ways to house more Kiwis at it’s own cost?
January 11th, 2010 at 2:03 pm
Les and other,
Sea Power, wind power, solar power etc. yes great !
New Light train transport in Chch – yes Wow !
New public transport in Auckland – yes wonderful !
How much does it costs ? Who pays and what % of the costs is actually done (manufactured) here in NZ ?
What part of those projects could be manufactured here in NZ ?
What part of those projects must be manufactured here in NZ ?
Decoding please !
Almost ideal projects to enter a new area (structure) in our national economy.
Initiated by the private sector, supported by the government creating contracts with international companies/ suppliers, which allow to develop/ manufacture products and help and start NZ companies to participle on those multi million projects.
Next to many other positive reasons offering new interesting jobs means keeping the young, talented potential brains here in New Zealand, which means keeping the money here in New Zealand.
Walter
January 11th, 2010 at 2:15 pm
Ian C
Both.
Personally – I want a roof over my head that isnt controlled by someone else. I also dont want my retirement lifestyle compromised by having to find money to pay rent.
Investment wise – there are deals out there at the moment, although the door is closing (based on my criteria anyway). Most of our properties were acquired in the early 00’s, and will mostly be mortgage free by our early 50’s….thanks to someone else paying the mortgage The fact there has been some capital appreciation is a bonus. Sure we have given a little back over the last couple of years but thats no drama.
January 11th, 2010 at 2:23 pm
Early 50’s!!! Are you having a laugh? You are making some MASSIVE assumptions (omissions) about what risks your assets face Andrew!
You made my morning with that one!
January 11th, 2010 at 2:29 pm
Luke. Ive got the numbers in front of me – you dont….so how can you possibly comment on my personal circumstances ?
Glad it made your morning.
January 11th, 2010 at 2:34 pm
Either way Andrew you are fortunate/smart to have made the decision to buy those houses when you did. I don’t personally believe we’ll see the same opportunity again until prices correct (houses were fundamentally undervalued in 2000, whereas they remain fundamentally overvalued now).
I understand the point on the family home, but imagine (if you can) that you don’t own a house… and don’t expect the value to increase in the next year… and rent is 1/2 the equivalent mortgage payment. Would you buy? You obviously don’t think its worth paying for the privilege to own another investment property at the moment…
January 11th, 2010 at 2:41 pm
Fair enough, Andrew. Your confidence in the market astounds me is all. Just be careful when incorporating those potential future gains… being the ’smartest guy in the room’ and all.
January 11th, 2010 at 2:41 pm
from the NZ Herald -
“The Reserve Bank predicts annual house price inflation will reach double-digit rates by early 2010 before easing back to 2 per cent in 2011.”…..
January 11th, 2010 at 2:48 pm
Ian C
“but imagine (if you can) that you don’t own a house… and don’t expect the value to increase in the next year… and rent is 1/2 the equivalent mortgage payment. Would you buy?”
On the face of it – no. But, in arriving at my decision I would also look at whether or not I could add greater value to the property than the sum of the mortgage payments over a given period, whether or not I thought funding costs would go up or down, what I thought would happen to prices in the longer run (ie in excess of 5 years), and whether or not that house would be available in a years time. if all of those answers were to the negative then I might sit on the sidelies and watch for a while.
January 11th, 2010 at 2:50 pm
Luke
As I said capital appreciation is a bonus. What I am basing this around is cashflow. If I relied on capital gains to extinguish mortgages id be a mug.
January 11th, 2010 at 3:24 pm
Well then Andrew, we are on the same page. I am simply saying 40 years is a long time horizon for any portfolio, let alone property. I’m sure you can have your internal factors accounted for over the period. Although, I wonder how ‘in-depth’ your analysis is when external factors are included…? Number of dummy variable’s per property per decade (be they market based or not)?
It’s the 40 year planning horizon which gets me Andrew. If I present a project over a 40 year period without rigorous modeling of the if/what/when potentials then I would be shown the door!
January 11th, 2010 at 3:42 pm
28_Yr_Old,
“Bruce I hope you don’t have all your cash reserves in just bank deposits or bonds, when interest rates go up and inflation rises your money will be eaten away
”
Not relative to the cost of housing. Cash might suffer relative to wages, but it will do well relative to those assets that are highly leveraged. A 50-100% rise in interest rates would have a massive downward effect on the market. And we only need to get to 12% mortgages for the 100% scenario to apply.
Property is between a rock and a hard place. It cant get much more expensive even if rate stay low casue affordability is shot. It cant enjoy inflation protection becasue it needs low rates to remain remotely affordable. Even with all the stars in alignment, the best case scenario is muted capital gains being more than eaten up by the ownership v rent costs. Put your money somewhere else. I am up 62% now on my ASX shares in the last 10 months, and its still rising.
January 11th, 2010 at 3:44 pm
Luke, I dont go out 40 years…..would probably blow my crystal ball up. I run the numbers based around a few key variables , overlaid with a good dose of gut feel. If it doesnt feel right I walk away.
There was no great science to it…certainly not to the extent I would present to the Board.I picked 25-30 years as that was the original term of the mortgages…and it coincided at the time with me being around retirement age when they ended. As rates have come down i’ve kept the payments up. 6.29% fixed until mid 2014 also helps.
Now later life is (hopefully) taken care of I can focus on the really important stuff like funding the wife and kids shopping habits
.
January 11th, 2010 at 3:51 pm
Currently Aussie banks are offering 8%+ on longer term deposits. Have you done the numbers if you just make deposits?
My key problem with housing is it is too hard to get at your money if you need it in a hurry. The returns do not justify this added restriction.
January 11th, 2010 at 3:53 pm
his early 50’s not 2050’s- now that has made my afternoon
January 11th, 2010 at 3:56 pm
Re: How likely is this scenario?
1) Capital gains/ land tax introduced ZERO CHANCE
2) Landlords increase rent to cut losses ALREADY HAPPENING
3) Beneficiaries can’t pay GOVT ALWAYS SUPPORTS THEM ie WINZ pays more for rent (from tax revenue)
I currently have a WINZ tenant, for which the rent is paid 100% by WINZ. COOL!
Or is this insignificant or the tax benefits outweigh any “new costs” to the Government? GOVT HAS NO IDEA
Will Government need to look at increasing it’s housing policies? i.e. look at ways to house more Kiwis at it’s own cost? ALREADY HAS A STATE HOUSE BUILD PROGRAM UNDERWAY
January 11th, 2010 at 3:58 pm
We have been buying and selling houses in the past five years quite frequently, as I work on contract whilst my other half renovates the houses we live in. Hence, we can’t have a buy-and-hold strategy; we have to buy at a price which we are reasonably assured of getting our money back out of in 12 to 18 months time on a quick sale. The houses we buy are above the rental-type price bracket – so our market is another homeowner.
We’ve just sold one in December – had the offer in less than a week on the market – and yes, sold signs going up everywhere here in November/December. Made a good capital gain over the 14 months we owned it – but only because we bought at the right price.
The 2008 stressed sales don’t exist so much at the moment – instead what we see is a whole lot of listings coming on from the “reluctant landlords” – i.e. those who bought at peak 2006 – 2007 prices and are now hoping that “the recovery” will allow them to resell at the peak price.
Although we’re staying here for another 6 months minimum, we’ve decided to rent – not going to chance it again at the moment. With deposit rates increasing at the pace they are, we think its going to be over 7% again for short term and on-call bank deposits by mid year. And we got a rental a considerable discount on what it had previously been rented for. The interest pays the rent – even at today’s on-call rate.
No sense in buying at today’s prices – because most of the asking prices are in fact yesterday’s (2007) selling prices. Sales volumes are still 2/3rds down on the peak frenzy. Unless volumes recover (and I just don’t know why they would) sales prices have only one way to go.
January 11th, 2010 at 4:12 pm
@Steve. Good mis-communication spot there *recoils in shame*. Aren’t we all having such a good day! Especially Andrew
January 11th, 2010 at 4:14 pm
that from Kate sums the whole real estate scenario up from all angles and from a factual anecdote..take a bow, Katey Potatey!
January 11th, 2010 at 4:24 pm
Jimmy the other
I agree, but my total LVR is 50% and my interest fixed until 2014, so I aint too leveraged. My point is if your young you should have some money in shares/property, not just deposits. Bank deposits are for baby boomers with a million in the bank
I have a large amount in ASX/international shares
Also my 5000 Michael Hill shares up 15% in one month
January 11th, 2010 at 4:30 pm
Cheers Rob. Yep, as Olly Newland once said – you make your money when you buy, not when you sell. We had a beachfront place, bought in 2000, sold in 2006. The guy who purchased it from us, sold it for another $200K (having spent $60K on renovations) about 16 months later. The new owners put it straight back on the market – and ended up owning it for just on 2 years – finally selling it at the same price we had back in 2006. A real “ouch” lesson for them.
True for all folks who are last on to the pyramid scheme, and I agree that’s what the banks were operating under during the 2002-2007 five year period. The likes of which we won’t see again anytime soon.
January 11th, 2010 at 4:43 pm
Bruce, that 8% rate is on 5 year term deposit. So, how you going to get your money if needed in hurry?
January 11th, 2010 at 5:19 pm
Murray
I wouldn’t pay any attention to the Reserve Bank’s predictions – they have a horrible track record!!!!
Lets look at some of the fundamentals for Auckland
On the pro-house price inflation side:
- New housing supply is limited: urban limits ,stringent planning controls and high regulatory fees, and limited finance for developers
- Although migration is likely to drop this year, there is still likely to be a reasonable inflow, with much of it coming into Auckland
- Kiwis are still enamoured with housing as an investment, perhaps even more so following the finance company debacle
On the other side of the fence:
- Unemployment is still rising
- Interest rates will rise this year
- If the kiwi $$$ stays strong this year this will inhibit the number of poms or returning kiwis buying housing here
- banks may still exercise a bit more caution re: lending to home buyers
- The mini surge in building consents in the second half of 2008 will be realised in terms of houses being delivered to the market in 2010
- Potential introduction of tax reform
All in all, I can’t get past seeing a flat scenario for house prices this year
January 11th, 2010 at 6:26 pm
Walter – “Who pays…” How do you think the Chinese pay for same? “My question is, where do they get their money from?”
http://www.interest.co.nz/ratesblog/index.php/2010/01/10/housing-market-activity-to-lift-values-to-level-off-as-more-move-to-sell-in-early-2010-qv-says/comment-page-2/#comment-55212
It could be paid for by processes discussed in this thread:
http://www.interest.co.nz/ratesblog/index.php/2009/12/29/summer-chart-series-why-consumer-confidence-is-indicating-a-spending-surge-in-2010/comment-page-5/#comment-55255
“…. what % of the costs is actually done (manufactured) here in NZ ?”
I dunno, but we could do more, and keep building capability, so we could do more for ourselves – if we can develop capability in a ‘pluralistic’ way, not a ‘centrally planned’ way.
Cheers, Les.
January 11th, 2010 at 7:39 pm
Matt in Auck,
You miss the most important “against” factor. Price massively exceeds value. If the median house was 1 million or one cent, the for and against factors you list would still apply. But would you consider a flat scenario then?? One day it will crash, but I agree it may not be this year.
January 11th, 2010 at 8:31 pm
Every month, we would expect several reports on property news. Instead, do we hear much about redundancies, job losses and unemployment rates. Why is there not much reported about job losses and unemployment rate, perhaps on a monthly basis. Are we already out of the “redundancy” mode? What about those who are still in the unemployment list? Why is our unemployment rate not released on a monthly basis? Would anyone care to comment?
Or do we just continue to talk about property ….?
January 11th, 2010 at 9:04 pm
Well,Ive just got of the phone with a mate in Aussie. The strong $ is causing all sorts of problems. In My area Apples will be a right off by the sounds of it. The Wineries are still selling the last 2 years crop, sheep are buggered average sheep and beef unit loss $-17902.00. Thats before drawings. Beef is hard work with the $. Not much money around rumors that many big players are not paying bills etc. Pretty much rural NZ is stuffed because our costs are too high, the $ plays a part but its mostly runaway costs. Its a classic crash scenario,’systemic failure’ systems shutting down, unemployment will be up. Im not optimistic as you can probably tell. Oils over $82 us. Our export markets are imploding food prices under pressure especially in the UK. This recession will be one to tell our Grandchildren about.
Oh,and my bank manager tells me pressure is on to up interest rates, low rates are the only reason many dairy farmers survived last year.
January 11th, 2010 at 9:13 pm
Housing prices will NOT continue to rise – the fundamentals do not stack up. Relatives have just come back from Bay of Islands/Coopers Beach/ Whangaroa – agents saying prices up there are back to early 2000 levels – every other property is for sale and they have 6 years worth of stock (at current sales volume). Sorry QV – your valuations for Northland are way off and are going to have to be readjusted very soon.
January 11th, 2010 at 9:36 pm
Go for a drive/ride around the business districts of any provincial town and have a look how many businesses have gone under.
Aucks and welly made be alright, but in tough times bigger companies close all there provincial outlets first and the road to recovery for these towns/cities is going to be a long and slow one.
January 11th, 2010 at 10:12 pm
Not just the provincials . Walk around Chch. CBD and see lotsa ” For Lease ” signs . Hope Mayor Bob has deep pockets to bail out all in the property industry who are struggling , not just Dave Henderson .
January 11th, 2010 at 10:38 pm
Andrew J
Iam not sure things are quite that bad for the dairy industry. The high production high cost systems of North America and Europe are in whole lot more trouble than here.
http://www.seattlepi.com/local/6420ap_wa_yakima_dairies.html
January 11th, 2010 at 11:11 pm
bit of a drought going on here –can,t be good?
http://www.odt.co.nz/the-regions/otago/88402/legal-threat-over-water-usage
http://www.radionz.co.nz/news/stories/2010/01/11/1247ebfab521
January 11th, 2010 at 11:18 pm
Les,
I’m always happy with fruitful debates, but following (y)our discussions here I feel you are too traditional and prejudiced.
The world changed forever, because of world- power shift/ / population & environmental problems/ worldwide recession/ shortage of some natural resources & money/ climate changes – just to name a few. This is a grave scenario humans never experienced before.
Under such fast moving circumstances we must leave behind traditional ways of thinking. Therefore it is secondary if initiatives are coming from the left or right, a form of central planning involving the government (Mark, Les we can’t just spread them on a loaf of bread and eat them) or not – a collection of positive results for companies/ nation is important. Also Classic Economic models are passé.
Les, NZMEA needs a new philosophy and the adoption of some form of a “Scenario Planning”. Under excessive economic international competition/ protectionism we need new ideas and fresh blood – a new orientation. For the upcoming situation and beyond first “System thinking” is in my view the way to go – a frame- work with priorities, achieving economic sustainability, independence, balance, wealth and happiness for the people of New Zealand – together !
Cheers Walter
January 11th, 2010 at 11:38 pm
First few months of 2010 will tell the house price story for the balance of 2010 – ie at least a 15% to 20% median house price lift through 2010 then another 10% more as we head into the rugby world cup and the migration factor kicks in.
QV figures do not take into account most sales that happened in November and December as in most cases for homes sold in those months the ownership would not have changed hands yet and it would appear that the housing market kicked into overdrive during those two months.
The crystal ball tells me that by February/March QV will announce an all time record high median house price and that will set off another wave of house buying activity which will only see house prices rise further.
Add to this double digit inflation for timber prices and build cost will also soar ie even less new homes built meaning house prices for existing homes need to increase in order for building to become viable again.
So sorry folks but for housing at least it looks like 2010 will be all boom and no gloom.
January 12th, 2010 at 12:26 am
Walter,
Is this a reasonable representation of your ‘philosophy’ (sorry, a better word should have been used)?
“Systems Thinking” -
http://en.wikipedia.org/wiki/System_thinking
A good example is given:
“Rather than trying to improve the braking system on a car by looking in great detail at the material composition of the brake pads (reductionist), the boundary of the braking system may be extended to include the interactions between the:
* brake disks or drums
* brake pedal sensors
* hydraulics
* driver reaction time
* tires
* road conditions
* weather conditions
* time of day”
To summarise (risking the wrath/mirth of all)
“Holistic rather than reductionist”
January 12th, 2010 at 12:34 am
Crystal Balls
Is your crystal ball on sale? With your crystal ball, you could buy up as many houses as possible before others get to it. Shuhhh…., don’t tell anyone what you see in your crystal ball so you could grab all the goodies, isn’t that better? Hope your crystal ball could give you the right prediction and fortune. Enjoy your 2010 property boom. So would you buy as many houses as you could in 2010? Shuhhh …. maybe don’t tell anyone, keep it to yourself !
January 12th, 2010 at 12:45 am
Oh, and thanks Jimmy(the other one) – quite made my day
“Price massively exceeds value” – agree totally, but now try explaining why, and how it can be adjusted in an orderly way – stuffs me up every time.
I keep coming back to opening crown land – and leasing subsections under strict conditions. (no vested interest – honest).
January 12th, 2010 at 12:56 am
the crystal balls of this world are about to be cleaned up by the interest rate base ball bat—what are u guy,s still doing up? 9.53 in brisbane -no daylite saving q/land govt still in the shit—it has the wors,t financial rating of all the aus state,s according to a report out today.
January 12th, 2010 at 12:57 am
KW John,
How can it be adjusted in an orderly way? Easy, restrict credit, or at least dont try to stimulate when it dries up as the RBA and govt have done over the past few years. Remember, according to everyone our banks are really really strong – their balance sheets shoudl be able to take it. The worl will not implode when housing crashes. It will become a better place, as it has in the US for those still holding a job and for future generations of home buyers. Asset inflation has only ever been a way to increase the wealth of the established at the expense of wage earners.
January 12th, 2010 at 8:49 am
pwilkie – 5 year fixed mortgage rate is only slightly above 10 year trend. Most people choosing to float at around 5.5% to 5.75% as floating rates will stay under 6% for the remainder of 2010.
Keep in mind the average NZ mortgage is only around 30% of value. It is only first home buyers that tend to have low deposits.
People should at least by now have a better understanding of why there has been no house price crash in NZ.
January 12th, 2010 at 10:11 am
tbm—scroll down to e6–new customer average rate–6.20 %
http://www.rbnz.govt.nz/statistics/monfin/rbssr/rbssrparte/data.html
January 12th, 2010 at 10:32 am
TBM, some people will never understand, they are too desperate.
January 12th, 2010 at 10:40 am
The average mortgage is irrelevant if you’re thinking about house prices – the marginal borrower (or the marginal defaulter) is a far greater driver of pricing.
January 12th, 2010 at 11:28 am
Ian C,
“The average mortgage is irrelevant if you’re thinking about house prices – the marginal borrower (or the marginal defaulter) is a far greater driver of pricing.
”
You are right, whats also misleading is the term “net wealth” which is often used to make the debt levels look not so bad. It only takes 10% of recent FHBs with huge mortgages to increase the net wealth of the other 90% with small mortgages by paying sky high prices. If the new entrants to the market decide they will no longer get a mortgage 6* salary, then net “wealth” will implode.
January 12th, 2010 at 11:41 am
TBM – you wrote “…..Keep in mind the average NZ mortgage is only around 30% of value. It is only first home buyers that tend to have low deposits…..”
Where did you get the data that average NZ mortgage is only around 30% of value? Please provide the link. Thanks.
January 12th, 2010 at 12:10 pm
That “average” number is correct (info spread around the RBNZ and stats.govt.nz website), but isn’t at all useful, as approx 1/3 of houses are owner-occupied with no mortgage (1/3 are rented, presumably some/many carrying a mortgage for the landlord and another 1/3 are owner-occupied and have a mortgage).
If you say that 50% of houses carry a mortgage in some way, the 30% average LVR becomes 60%.
January 12th, 2010 at 12:28 pm
Great…fantastic news right Bill English!…homes to remain seriously unaffordable and encourage young families to rent..meaning good news for the Heatleys of this world.
January 12th, 2010 at 12:33 pm
Wally…Yup
Dog eat dog mate… until there are no more dogs.
January 12th, 2010 at 12:41 pm
Eventually we’ll end up begging Oz to stop ‘taking’ our young,
as we need them to rent from us.
hmmmmm…. A new policy to keep the ‘property investors’ happy.
January 12th, 2010 at 7:57 pm
Wow… I’m getting good at something – thanks for the starter Wally.
January 12th, 2010 at 8:39 pm
Nice try killing the thread KW
Here’s a bit of entertainment for you property watchers
http://survey.tarawera.co.nz/phpESP/public/survey.php?name=ExpertSurvey
January 12th, 2010 at 11:07 pm
Thx for that 29 yr old – great survey