For the first time the number of tourists coming to New Zealand over a one year period has topped 2.5 million.  Given the global financial crisis and worldwide H1N1 (“Swine Flu”) pandemic this is especially encouraging for tourism in New Zealand.

According to Statistics New Zealand the total visitor arrivals topped 2.501 million for the year ending June 2010.

Population Statistics manager Bridget Hamilton-Seymour says “This milestone was almost reached in 2008, but the global economic downturn contributed to a decline in visitor numbers after a peak of 2.497 million in the March 2008 year.”

Our Australian neighbours make up 45% or 1.119 million visitors to New Zealand over this period.   Tourists from the UK make up 10% or 248,900 of all visits.  Visitors from the USA account for 8% or 194,000 persons in the June 2010 year.  A further 7.5% of tourists came from China (105,200) and Japan (83,600).

The month of June saw a total of 145,800 visitors to New Zealand; this is up 8% from monthly figures in June 2009.

Visitor numbers from China, Japan, and Korea have recovered from the previous year after the swine flu crisis affected arrivals from these countries.  Australian tourist numbers are also up on 2009 figures.

Ref: www.stuff.co.nz/business/

The latest Quotable Value survey on the New Zealand housing market shows more people think that it is a good time to buy than when the last quarter research was completed in March 2010. The confidence in the market has also improved since March with 56% of respondents believing prices will stay the same or rise by up to 5% over the next 12 months.

Property values are the main factor for people buying or selling.  The implications of the recent tax changes around property investment have not had the impact some were expecting and this has helped to restore confidence in the market.

A specific set of questions to property investors in the survey yielded some interesting results.  Although the depreciation changes were set to have the most impact on this group, the overall result has seen investors on the whole look to keep and expand existing portfolios.  It is also clear that investors plan to increase rents, with most indicating there will be a 1% to 5% increase over the next 12 months.

These positive results are good news for investors and the property market as a whole.

Ref: www.qv.co.nz

In the latest Mercer Cost of Living Survey Auckland and Wellington have emerged as two of the cheapest cities in the world to live in.  Auckland came in 149th place and Wellington in 163rd place, beating all Australian cities surveyed in offering value for money.

There were 214 cities in the global study with Tokyo and Osaka (Japan) coming in the top 10 most costly cities and Karachi, Pakistan (214) coming in at the most affordable city to live in.

The Mercer survey measures the comparative cost of more than 200 items in each location, including housing, transport, food, clothing, household goods and entertainment.  It is used to help multinational companies and governments determine compensation allowance for their expatriate employees.

New Zealand was ranked more affordable than Australian cities in the study, including Sydney (24) Melbourne (33), Brisbane (55), Perth (60) and Canberra (74).

Mercer senior researcher Nathalie Constantin-Metral said New Zealand and Australia remain cost competitive countries for companies sending staff to the Asia Pacific region for expansion; particularly when compared to the cost of living in Japan, China, Hong Kong and Singapore (all in the top 20 most costly cities).

Costly cities
1 Luanda, Angola
2 Tokyo, Japan
3 Ndjamena, Chad
4 Moscow, Russia
5 Geneva, Switzerland
6 Osaka, Japan
7 Libreville, Gabon
8 Zurich, Switzerland
8= Hong Kong
9 Copenhagen, Denmark

Most affordable
205 Windhoek, Namibia
206 Tegucigalpa, Honduras
207 Kolkata/Calcutta, India
208 Addis Ababa, Ethiopia
209 Bishkek, Kyrgyztan
210 Ashkhabad, Turkmenistan
211 La Paz, Bolivia
212 Islamabad, Pakistan
212 Mangua, Nicaragua
214 Karachi, Pakistan

Ref: www.nzherald.co.nz/business/news/article

An increase in the Official Cash Rate (OCR) this month had some investors concerned about the stability of the property market and property prices moving forward.

However Reserve Bank Governor Dr. Alan Bollard has said that because more than 30% of mortgage debt is on floating rates and the long term rates are now higher than short term, the OCR will not need to be increased at the same speed as previous recoveries.

The Real Estate Institute of New Zealand (REINZ) President Mr. Peter McDonald says “Interest rates are only one of many factors which influence the property market.  While Dr. Bollard notes that households continue to be cautious about investing in homes, median prices are still up on a year ago as we have not yet caught up on the supply shortage caused by the fall in the building of new houses during the recession.”

Mr. McDonald goes on to say that the Reserve Bank has found clear signs that the New Zealand economy is well into recovery, which should be reassuring for first home buyer and investors.

Ref: www.reinz.co.nz

The Mercer Quality of Living Survey rates over 220 cities throughout the world on variety of factors including the current political, social and economic environment.   Housing, schools, public services and access to consumer goods are also considerations for the rankings.

Auckland topped the Asia Pacific category (coming in ahead of Sydney and Melbourne) and rated 4th equal overall, tied with Vancouver and coming in behind Vienna, Zurich and Geneva.

Wellington rated well in the Eco City category, coming in at 5th Placed overall in the world; number 1 in Asia Pacific.  The eco ranking relates to water availability and drinkability, waste removal and quality of sewerage systems, air pollution and traffic congestion.

Baghdad remains the worst city on the index, placed last out of the 221 cities surveyed this year and London, Tokyo and New York came in at 39, 40 and 49 respectively.  Australia fared well on the index with Sydney coming in at 10, Melbourne (18) and Perth (21).

Mr Slagin Parakatil, a representative from Mercer (a leading global provider of consulting, outsourcing and investment services) said that “Quality of living standards remained relatively stable on a global level throughout 2009 and the first half of 2010, but in certain regions and countries the economic recession had a noticeable impact on the business climate.”  He went on to say “though a high standard of living may be taken for granted in certain cities, a lack thereof is much more noticeable and can even lead to severe hardship.”

Top 5 cities: Quality of living ranking

• Vienna, Austria (1st)
• Zurich, Switzerland (2nd)
• Geneva, Switzerland (3rd)
• Vancouver, Canada (tied 4th)
• Auckland, New Zealand (tied 4th)

Top 5 cities: Eco-city ranking

• Calgary, Canada (1st)
• Honolulu, United States (2nd)
• Ottawa, Canada (tied 3rd)
• Helsinki, Finland (tied 3rd)
• Wellington, New Zealand (5th)

Ref: www.mercer.com/qualityofliving

 Source: NZ Herald

About 10,000 new homes need to be built in New Zealand to keep pace with population growth and ease the current housing squeeze, a report released by Westpac shows.

The report says the number of houses built halved in the two years to 2009, while population grew 0.4 per cent as fewer Kiwis crossed the Tasman.

The resulting squeeze on housing - only the third since reliable data began in the 1960s - had boosted the average number of people per house in New Zealand from 2.52 to 2.55 during 2009.

A rapid growth in construction activity was needed to ease the squeeze, the report says.

“By our calculations the current rate of house building will be enough to keep the number of people per house constant through 2010, but will not be enough to bring it down,” the report says.

Westpac is picking a 23 per cent growth in residential construction for 2011, and even that would only just be enough to keep up with population growth.

Even more would be required during 2012 to make inroads into the shortage.

“Those forecasting lesser increases would have a job to explain exactly where people were going to live,” the report says.

Earlier this year the Salvation Army said the slowdown in the building sector had left Auckland short of at least 6000 homes, with the greatest pressure going on South Auckland households.

Population growth in Auckland had far outstripped residential construction, which had plunged to a 20-year low, forcing more than 20,000 Aucklanders to live in overcrowded conditions, the organisation’s 2010 State of the Nation report, A Road to Recovery said.

Westpac said one way to consider the current situation was to compare the number of people per house to its estimated trend.

“That suggests that New Zealand has a housing shortage of about 10,000 houses,” the report says.

Historically every time New Zealand has gotten into a housing shortage situation, the residential building industry had responded by ramping up production to restore balance, the report says.

“We expect this time will be no exception.”

Fears that difficulty obtaining finance will prevent a pick-up in residential construction, like it had following previous recessions, ignored the lessons of history and economics.

“Market economies tend to find ways of getting around obstacles, normally by throwing up new price signals.

“In this case developers who relied on cheap finance have been forced to sell land, pushing the price of undeveloped residential sections down by 15 per cent since 2008,” the report says.

Over the same period house prices have remained unchanged, therefore the margin on offer for successful property development was now much wider than it was during the boom.

“There is a juicy profit opportunity on offer for larger firms that are less reliant on finance to get involved in residential property development which is precisely what we think will happen,” the report says.

Auckland’s housing market is humming through the winter, with prices up in most suburban areas.

Data out yesterday from the Real Estate Institute showed increases.

The institute said the median house price was down $6000 nationally.

Wendy Alexander, Barfoot & Thompson chief executive, said the long summer meant people relaxed, stayed in their summer clothes longer, avoided shopping malls and traded their houses.

“Now we’re all going brrrrrr. Everyone is burrowing in. We’re having a very quiet June. But in April and May, there was tremendous demand,” she said. Barfoot’s wanted more listings to satisfy buyer demand.

Glorianne Campbell of the institute said a combination of more demand and more expensive houses selling probably pushed up Auckland prices.

North Shore’s median rose to $550,000 in May from April’s $540,000 and was a big jump on the May 2009 median of $505,500, the institute found.

Waitakere’s median increased to $400,500 from $394,000 in April and May 2009’s $357,500, although Papakura’s median dropped by $31,000 from April to May on the back of 54 sales last month.

Medians within Auckland City Council’s territorial limits increased to $520,000, from April’s $518,000 and May 2009’s $519,750.

Manukau’s median rose from $432,000 in April to $438,000 in May.

The institute said the market was still holding up well. Tax changes and rising mortgage interest rates could have taken a higher toll.

“It is good to see the market retain its strength and prices stay stable during a period when some buyers would have been concerned about potential tax and interest rate changes,” he said. Agents sold 5206 residential properties last month and 5207 in April.

“The May median is still 3.7 per cent up on the median price of $337,500 in the same month in 2009, so we are still not seeing any significant fall in property values. With tax changes and interest rates now settled, property investors are already talking about returning to the market to cater for the growing demand for domestic rentals.

Source: NZ Herald

House prices have risen to their highest March level in two decades, while the number of sales broke through the 6000 barrier last month after dropping at the end of last year.

Latest figures from the Real Estate Institute of New Zealand (REINZ) put the median sale price of homes in New Zealand last month at $360,500, seven per cent up on the same period last year, and the highest March figure in 20 years.

REINZ president Peter McDonald said the apparently strengthening market was an encouraging sign.

“Despite an abundance of good listings at present, we are still seeing prices going up as a result of strong demand from genuine home buyers.”

The total value of residential values, including sections, in New Zealand during March was $2.73 billion, an increase on the February total of $2.14 billion.

The March total of 6161 dwellings sold was also an improvement on the February figure of 5029 and was well up on January’s figure of just 3666.

McDonald said the figures were in contrast to November figures when listings were short and prices went up because demand was not being met.

The largest annual percentage increases were in Auckland, up 9.31 per cent to $475,500, and Taranaki, up 8.52 per cent to $280,000.

Southland also showed strong growth with the annual median price rising more than 5.3 per cent to $191,750.

Another indicator of the strengthening market was the recorded fall in the median number of days which fell from 46 to 35 from February to March.

Sales were quickest in Wellington, Canterbury/Westland and Otago at 29 median days.

4 February 2010

Record numbers of overseas visitors came to New Zealand in December, new figures from Statistics New Zealand show.

There were 341,300 visitors in December, the highest ever recorded in one month, and a 6 per cent increase over the previous record of 322,200 in December 2008.

Visitor figures have increased in seven of the last nine months over the same months in previous years.

The December increase was driven by 14,000 more Australian visitors, along with 2800 more visitors from the United States and 1200 more from Singapore. However, visitors from China were down by 2300.

There were 2.458 million visitors in total last year, similar to 2008 levels but down from 2007.

Australian visitors were up 106,500, an 11 per cent increase, but there were fewer visitors from the United Kingdom, Korea, Japan, the US and China.

New Zealand residents went on slightly fewer overseas trips last year, with 1.918 million short-term departures, down 2 per cent on 2008.

The number of New Zealanders moving overseas also decreased last year, with permanent and long-term departures down by 18,500, including 15,700 fewer to Australia.

New Zealand’s overall migration balance was a gain of 21,300, the highest since 2004, when there was a gain of 22,000.

Recent commentary on New Zealand’s property market claim that it is showing renewed strength with prices back up near levels last seen at the height of the property market in 2007.  However, although there are many positive signs, the suggestion that the property market is booming is really not supported when one examines the market place.  It is important to understand what is driving those property prices up.

Data from the latest New Zealand Property Report showed that nationwide inventory of property for sale has increased in November with 13,857 new listings – up from 13,550 in October.   But, to put this increased new listings figure in perspective, they also reported that over the past twelve months there has actually been an 11 percent fall in listings compared to the same twelve-month period spanning 2007/2008.   This fact supports the perception among property experts that supply of properties for sale is still very tight, which in turn puts upward pressure on property prices.

Another positive sign is the rate of sales, which has seen a ten percent increases on the prior twelve-month period – still down 31 percent on the 12 months to October 2007.  This reflects a steady and stable buying environment and thus, it is fair to conclude that speculation is not putting a great deal of upward pressure on the Auckland Property prices.

That leaves that all-important factor that influences house property prices – namely the right supply of new inventory in places where people want to buy.  Where this is out of balance prices will increase, especially where the supply of existing properties coming onto the market is tight, as is the current position.

On one hand, the national average indicates that there is growth in new listings with 36 weeks of estimated supply, up on the 31.5 weeks in June this year.  However, the New Zealand Property Report points out that the increase is not evenly spread across the country with the major centres actually seeing further decline, whereas provincial NZ is seeing significant inventory increases.

Whilst there are a number of factors one can point to for this trend, there are two that the property investor would note.   One is the fact that in times of uncertain job security, people tend to migrate to the main centres where employment opportunity is greater.  The second is the exit of fringe speculators who tend to be more active outside the main centres where property is cheaper in boom times.

These trends point to the fact that without substantial new housing inventory in the main centres there will be a continuing upward pressure on prices.  Pressure on inventory leads to increased expectations from those with properties in areas of high demand.  Over the last 3 months the country’s median asking price has been boosted to $419,586 – up 3.6 percent on November 2008.  The percentage increase is even higher in the main centres.

The New Zealand Property Report notes that:
“The price rise in Auckland of 4.1% is a direct result of the tightness of the market with inventory levels remaining tight as the flow of new listings seems to be being met by a steady demand. “

One prominent Auckland Real Estate Firm also reported that their median sale price for November was the highest in 23 months. Upon noting that their average price has increased for the third consecutive month, they suggest that:
“The level of activity and strength of prices in the housing market is a strong signal that in Auckland at least property has returned to being seen as a sound, medium to long-term investment option.”

The Institute of Economic Research cautions that “House prices are showing renewed over-valuation”.   However, the Real Estate Institute of New Zealand argues that the signs point more towards a fairly balanced market environment.  It notes that using the Reserve Banks’ stratified house price index, the current (Oct 09) price in Auckland is $480,510 against a peak in July 2007 of $510,197.
- so we are still currently 5.8 percent below the 2007 peak.

What does this all mean for people looking to buy or sell property?  As there is no over supply of property or evidence of high speculator activity in the main centres, property values will remain stable and, more likely, steadily increase depending on the neighbourhood.  New property in sought after areas should experience a higher level of demand with a more rapid turnover than has been experienced over the last 18 months.  The speculative oversupply of housing that has so plagued other international markets is clearly absent in the case of New Zealand property in general and, in the main centres in particular.  Like all things, the level of understanding of the local variables can make for a good or bad decision, but the fundamentals support current and long-term investment in the property market, especially in the main centres.

Ref:  New Zealand Property Report, NZ Herald, REINZ