Source: NZ Herald

19 December, 2008

The Governor of the Reserve Bank of New Zealand’s latest move has sent house buyers scurrying on to the market to finalise deals on properties…

Housing loan approvals jumped 30.6 per cent in the week to December 12 to 9,314, the highest weekly number since June 2007 when the housing boom was at its peak.

The value of housing loans approved leapt 33.7 per cent to £391.7 million, the highest level since the second to last week of December last year.

This was the first week after the Reserve Bank’s 150 basis point cut in the Official Cash Rate and the first week after six month fixed mortgage rates fell to seven per cent.

It’s too early to say this big jump represents some turning of the market or signs of a recovery in lending to the household sector.

This is the second to last working week before Christmas and is always a busy week as home buyers and bankers rush to complete deals before the Christmas break.

However, the volumes and value of approvals in this week were above the corresponding week a year ago (8,480 approvals worth £385 million) and only just below the corresponding week two years ago (11,193 worth £567 million).

There may also have been some pent up lending applications as buyers waited for confirmation of the size of the Reserve Bank’s rate cut on December 4th.

But regardless of these factors, the strength of the gain in the last week does indicate some activity returning to the housing market.

 Source: NZ Herald

18 December, 2008

Alan Bollard’s latest move has sent house buyers scurrying on to the market to finalise deals on properties.

Housing loan approvals jumped 30.6 per cent in the week to December 12 to 9,314, the highest weekly number since June 2007 when the housing boom was at its peak.

The value of housing loans approved leapt 33.7 per cent to NZ$1.032 billion, the highest level since the second to last week of December last year.

This was the first week after the Reserve Bank’s 150 basis point cut in the Official Cash Rate and the first week after 6 month fixed mortgage rates fell to 7 per cent.

It’s too early to say this big jump represents some turning of the market or signs of a recovery in lending to the household sector. This is the second to last working week before Christmas and is always a busy week as home buyers and bankers rush to complete deals before the Christmas break.

However, the volumes and value of approvals in this week were above the corresponding week a year ago (8,480 approvals worth NZ$1.013 billion) and only just below the corresponding week two years ago (11,193 worth NZ$1.491 billion).

There may also have been some pent up lending applications as buyers waited for confirmation of the size of the Reserve Bank’s rate cut on December 4. But regardless of these factors, the strength of the gain in the last week does indicate some activity returning to the housing market.

December 2008

In an interview with The New Zealand Herald, Ashley Church, a veteran property investor with 30 years’ experience and Chief Executive of New Zealand’s Property Traders Association, offered 10 reasons why investors should buy property in New Zealand now…

1: Buyers have a choice of stock and not much competition at present.

2: Building consent numbers have fallen by 22 per cent and are still falling. Tony Alexander, Chief Economist of the Bank of New Zealand says they are at their lowest level since the early-1990s and a homes shortage will start to show later next year.

3: New homes will be more expensive to build as the falling dollar increases the cost of importing construction material and a number of builders have left or are leaving the industry.

4: Investors have been quitting rental properties, which will lead to a shortage and rents rising. “Investors have largely disappeared from the market. Fundamentals driving the need for rentals have slowed but not stopped - rental demand is still strong; it’s a recipe for a future boom,” Church says.

5: Falling interest rates and tax cuts have increased the affordability of home ownership. Real Estate Institute President Mike Elford says home affordability is the best it has been for a long time. Buyers with good credit history and payment capacity are still able to secure low-deposit finance.

6: The real estate market has not imploded in the current financial crisis - prices have held steady in the face of negative media. Elford says despite slowing sales, median prices are holding.

The national median house price for last month was £124,300 compared with £123,300 in October and £129,600 for the corresponding period last year.

This shows a decrease in national median house values of 4.11 per cent compared with this point last year. Alexander says house prices will decrease only 5-10 per cent by the end of the year.

They will stay flat over next year but rise in 2010. “It is quite amazing the number of people who seem to believe we should be predicting massive price declines in the face of fundamentals which suggest otherwise,” says Alexander, who receives “hate mail” for refuting suggestions that house prices will fall by between another 30-40 per cent.

Church says the present property slump is nothing like that in the mid-70s when values fell 38 per cent. We won’t see that this time, he says, because the drop in interest rates will allow people to hold on to their homes.

7: At the same time, vendors are now very negotiable on price compared with this time a year ago. They are increasingly aware they may need to leave some money in their property in the form of vendor finance if they want to sell, and that investor buyers look for positive cash-flow properties.

8: Positively-geared property deals can again be found all over.

9: Prices will recover and property values will increase again. The downturn in property is due to a lack of confidence rather than any change in the property market fundamentals, Church says.

10: There is nowhere better for most Kiwis to invest their money given that property has doubled in value, on average, every seven years for more than 50 years - and there is nothing to suggest that will change.

Source: Landlords.co.nz

11 December 2008

New Zealand has long been a popular relocation spot with UK nationals looking for a new life abroad. However, New Zealand has not traditionally been on the property investor’s radar, but with its property market showing promising monthly growth, it may be time to take a look at homes down under.

New Zealand’s average house price rose from NZ$330,000 to NZ$335,000 from September to October this year and according to the Real Estate Institute of New Zealand (REINZ), properties in 5 out of the country’s 12 regions increased in price during October 2008. Prices in the region of Taranaki, in the west of North Island, saw an increase of 8.67%, rising from NZ$262,250 to NZ$285,000. Prices in Northland (the northern part of North Island) also saw a rise in excess of 8%.

According to REINZ, the uncertainty that surrounded the last general elections has now been dispelled and the recent falls in both interest rates and fuel prices mean that confidence has returned to property investors. The latest rises in house prices would seem to confirm this tendency.

New Zealand is world-renowned for its spectacular scenery and high quality of life, and is a popular holiday destination. Recent accolades confirming New Zealand’s tourist potential include Golf Destination of the Year 2009 (for the region of Asia and Australasia), and the winner of Virgin Holidays’ Responsible Tourism Award as the world’s greenest destination.

In addition, New Zealand regularly hosts world-class events, particularly when it comes to sailing competitions. The forthcoming Louis Vuitton Pacific Series, a 2-week sailing competition to be held in Auckland during January 2009, is just one example.

“At a time when property markets in many countries are suffering a series of set-backs, the news from down under is surprisingly good,” comments James González, Market Analyst at Obelisk. James believes that New Zealand may well be the next place to investigate for property investment.

7 December, 2008

The Reserve Bank on Thursday 4 December cut its official cash rate by an unprecedented 1.5 percentage points to 5 percent and banks moved quickly to cut lending rates by varying amounts.

“It will provide a solid boost to business confidence and give us the chance to return to growth next year,” said Wellington Regional Chamber of Commerce chief executive Charles Finny.

Bruce Goldsworthy, acting chief executive of the Employers and Manufacturers Association (Northern) said given the softening in demand in world markets, exporters needed today’s big cut to keep downward pressure on the New Zealand dollar.

The New Zealand dollar has fallen from above US82c this year to US53c this week, increasing returns to exporters. But exporters also face the prospect of slower demand in export markets as a result of the global financial crisis.

Countries around the world have slashed interest rates to stimulate economies. This week the Reserve Bank of Australia lowered its rate by 100 basis points to 4.25 percent, taking the rate to its lowest level in 6-1/2 years.

“For exporters it’s vital that our interest rates do not get too far out of whack with those in Australia and elsewhere lest our currency falls victim to offshore speculators and/or investors in our debt instruments,” Mr Goldsworthy said.

Source: NZ Herald

8 December, 2008

The latest Roy Morgan consumer confidence survey, conducted over the two weeks November 17-30, shows New Zealanders have become more confident since the election.

This is the highest reading since the brief September spurt, and prior to that the highest since March.

Retailers should breathe a little more easily for Christmas as now a rising 45 per cent (up 8 per cent) say now is a “good time to buy” major household items, level with the falling 45 per cent (down 6 per cent) who say now is a “bad time to buy”.

We are also far more positive about our personal financial situation compared to a year ago with 39 per cent (up 7 per cent, and the highest since the beginning of March 2008) of New Zealanders saying their family is “better off” financially than a year ago compared to 33 per cent (down 10 per cent), saying their family is “worse off.”

Looking further ahead we are increasingly confident with 51 per cent (up 5 per cent) of New Zealanders expecting “good times” for the country during the next five years while only 26 per cent (up 1 per cent) expect “bad times.”

This poll was conducted after the general election on November 8, but before the big RBNZ rate cut on December 4, 2008.

Source: landlords.co.nz

4 December 2008

A  massive cut in interest rates is bound to spark the languid property market into life, even though we are moving into the silly season, aka Christmas.

The Reserve Bank, today, cut its official cash rate (OCR) 150 basis points bringing it down to 5.0%, a number we haven’t seen for a long time and one which six months ago we could only dream of.

During the day a number of organisations have cut their lending rates, but few have passed on the full 150 points – yet. The biggest mover is SBS which has taken its floating rate to a market low of 7.20%.

What is worth noting though is short-term rates, including the floating rate, are for many lenders at four-year lows.

These big cuts over the past few months are changing the numbers of investment properties. This means it is getting easier to make them cash flow positive, or at least get pretty close to a neutral situation.

Current trends are indicating was that investors are looking, but not getting carried away with prices.

The cut in finance costs may allow them to up their prices a bit more or be less cautious in their approach.

The other event which may change sentiment in the market is the government’s guarantee on deposits. This may help, as surviving finance companies are now getting money rolling in the door and that is helping their liquidity, but also allowing them to resume making loans again.

While most of this lending will be in the commercial and development markets, it may just be enough to help get the market moving again.

If it does start moving it is likely to be slow, rather than a quick, accelerated pick-up.

Source: NZ Herald

4 December, 2008

Banks moved within hours to slash home loan rates in the wake of the Reserve Bank cutting its official cash rate by a record 1.5 percentage points to 5 per cent.

State-owned Kiwibank said it was offering a one-year fixed rate of 6.49 per cent and a variable rate of 7.45 per cent.

Westpac cut its fixed mortgage rates with the two-year rate falling 50 basis points to 6.85 per cent and the five-year rate falling 45 basis points to 7.4 per cent. The Westpac one-year rate is 6.8 per cent.

The ANZ and The National Bank brands are offering six month, one-year and 18 month fixed rate mortgages at 6.99 per cent.

Many of the banks said they had already cut rates in anticipation of today’s move so collectively the moves were large.

ANZ National, ASB, BNZ and Invercargill-based SBS Bank announced their cuts today.

In a clear message to lenders, Reserve Bank governor Alan Bollard said the Reserve Bank expected financial institutions to play their part in the economic adjustment process by passing on lower wholesale interest rates to their customers.

The Reserve Bank acknowledged that recent falls in wholesale interest rates had resulted in “markedly” lower mortgage interest rates offered to new borrowers and households re-pricing existing debt.

Today’s decision brings the cumulative reduction in the official cash rate since July to 3.25 percentage points.

However, banks have moved to tighten credit policies, making it harder for first time home owners to borrow money. ANZ National Bank and some other lenders are now requiring a 20 per cent deposit for most home purchases.

Kiwibank made significant cuts to its rates in late November in anticipation of the move by the Reserve Bank, chief executive Sam Knowles said.

“The decision by the Reserve Bank to make a cut of 1.5 per cent gives Kiwibank room to pass on further savings to those with home loans,” he said.

“In the space of two weeks we have been able to bring down our variable rate from 8.70 per cent to 7.45 per cent. We have also brought the key short-end fixed rates below 7 per cent.”

The bank has not been able to offer such low home loan rates for four years, he said.

ASB announced a drop in its variable home lending rate by 75 basis points, saying it had already cut 75 points in anticipation of the Reserve Bank’s actions. Its new rate is 7.95 per cent. Other term rates remain the same.

SBS, the former Southland Building Society, dropped its floating rate mortgage 195 basis points to 7.20 per cent - a four-year low.

“SBS Bank is able to pass on the full benefits of the OCR reduction and more because we are not affected by the increased cost of borrowing offshore, which has been a result of the global credit crunch,” said chief executive Ross Smith.

“In real terms, it means that householders on a floating rate with a 30-year, $300,000 loan will see about $315.00 carved off their monthly mortgage payments. Passing on the full reduction could potentially be a lifeline to some homeowners.”

BNZ cut its floating mortgage rate to 7.75 per cent for mortgages with a 20 per cent deposit. Its six month rate drops to 6.49 per cent.

The ANZ and National Bank variable mortgage rate is now 8.2 per cent.

Source: NZ Herald

Dec 04, 2008

Queenstown and the Lakes District, the South Island’s internationally renowned tourist area, has been rated as New Zealand’s most affluent place to live.

The Lakes District and tourist town just scraped home over the North Shore City, in Auckland, said Stephen Hart, the author of a report which examined a range of factors from more than 70 territorial authorities throughout New Zealand.

He said, after producing a list of 20 cities and districts based on house prices, they also looked at several other factors, including households earning more than $100,000 a year, homes least likely to be in deprived areas, the percentage of residents with a degree, lowest unemployment rates, and residents who were chief executives, general managers or legislators.

In his report, commissioned by the ASB Bank, Mr Hart said Queenstown, where “more and more of our most successful city folk are choosing to call home”, only just scraped home in first place ahead of North Shore City.

He said they were not searching for the domains of the super-rich or the hideaways of celebrities.

“What we want to discover is which of New Zealand’s towns and cities could be best described as being the most ’sought after’ and their residents’ the most ‘comfortable’.”

He said, like it or not, the most fundamental indicator of a place’s desirability was its house prices and if a lot of people wanted to live somewhere house prices rose as a result of that demand, and analysing house prices was a good place to start.

House prices and the other factors were allocated points to put the list of 20 places in order, starting with the most affluent.

Mr Hart said Queenstown Lakes was undoubtedly a highly desirable place to live. The population of 23,000 grew by 35 per cent between 2001 and 2006 - more than anywhere else in the country and more than four times the national average.

The average home in Queenstown Lakes was more than $570,000. Only North Shore City had a higher price at $573,000.

Queenstown Lakes also scored well against all other criteria, especially jobs. Its unemployment rate of 1.7 per cent was lower than any of the other contenders.

Queenstown people were also “a well qualified bunch with 19 per cent possessing a bachelor’s degree or higher, the fourth highest in the country”.

Mr Hart said Queenstown was also fourth in its percentage of population in the top occupation category of chief executive, general managers and legislators, behind Rodney District, Auckland and North Shore cities.

North Shore City was unlucky not to come out first overall. It was in the top three for every measure, except for its unemployment rate which at 4.3 per cent was lower than the national average of 5.1 per cent but only ninth-best of the places surveyed.

Wellington City was the best qualified and highest paid place in New Zealand but, surprisingly, rated only ninth for the number of chief executive officers, general managers and legislators. More lived in the nearby Kapiti Coast District.

Porirua and Manukau Cities scored higher than many expected. They ranked fourth and fifth respectively for households earning more than $100,000 a year - higher than Queenstown Lakes District.

Auckland City was second for high earners, graduates and senior managers, and third for house prices. Its unemployment rate of 5.7 per cent and ordinary low deprivation decile scores meant it would never be in the very top tier.

The top 20 most affluent places to live were:

1. Queenstown Lakes District

2. North Shore City

3. Wellington City

3. Auckland City

5. Rodney District

6. Selwyn District

7. Franklin District

8. Porirua District

9. Manukau District

10. Tauranga District

11. Tasman District

12. Central Otago District

13. Waitakere City

14. Kapiti Coast District

15. Thames Coromandel District

16. South Wairarapa District

17. Lower Hutt City

18. Taupo City

19. Christchurch City

20. Nelson City

Other snapshots from the report included:

House prices
Highest: North Shore City $573,430.
Lowest: Tararua District $145,742

Percentage of households earning over $100,000 a year
Highest: Wellington City 35.2 per cent.
Lowest: Buller District 6.3 per cent.

Percentage of households in deprivation deciles 1 to 3
Best: Selwyn District 69.9 per cent.
Worst: Wairoa District 1.4 per cent.

Percentage of people with a bachelor’s degree or higher
Highest: Wellington City 35.3 per cent.
Lowest: Kawerau District 3.7 per cent.

Unemployment rate
Best: Queenstown Lakes District 1.7 per cent.
Worst: Kawerau District 13.7 per cent.

Percentage of population of chief executives, general managers and legislators
Highest: Rodney District 5.3 per cent.
Lowest: South Taranaki 1.6 per cent.

Reserve Bank of New Zealand - Media Release

Date 4 December 2008

The Reserve Bank today reduced the Official Cash Rate (OCR) from 6.5 percent to 5.0 percent.

Reserve Bank Governor Alan Bollard commented that “ongoing financial market turmoil and the marked deterioration in the outlook for global growth have played a large role in shaping today’s decision. Activity in most of our trading partners is now expected to contract or grow only very slowly over the next few quarters.

“Economic activity in New Zealand will be further constrained as a result, compared with our view in October.

“Inflation is abating here and overseas as a consequence of these developments. We now have more confidence that annual inflation will return comfortably inside the target band of 1 to 3 percent some time in the first half of 2009 and remain there over the medium term. However, we still have concerns that domestically generated inflation (particularly local body rates and electricity prices) is remaining stubbornly high.

“Today’s decision brings the cumulative reduction in the OCR since July to 3.25 percent, and takes monetary policy to an expansionary position. Given recent developments in the global economy, the balance of risks to activity and inflation are to the downside. Thus it is appropriate to deliver this reduction quickly to support the economy and keep inflation from falling below the target band.

“Monetary policy is working together with the depreciation of the New Zealand dollar and the fiscal stimulus now in train, to provide substantial support to demand over the period ahead and to create the conditions for some rebound in growth as global conditions improve.

“To ensure the response we are seeking, we expect financial institutions to play their part in the economic adjustment process by passing on lower wholesale interest rates to their customers.

“Further movements in the OCR will be assessed against emerging developments in the global and domestic economies and the response to policy changes already in place.”