Source: Business Day

OPINION: Nobody does an MBA and has the lecturer say to them the success of their business will depend upon the state of the economy.

Business outcomes are almost always going to reflect management decisions. But sometimes the state of the economy will have a clear impact on businesses either for the better or for the worse and that is where us economists come in.

We can provide insight into whether the broad external environment businesses are operating in will provide unusually good opportunities for profit growth or will contain an unusually large number of threats. We can also use our economic analysis to provide insight into risk management decisions such as regarding interest-rate exposure and sometimes exchange-rate flows.

With regard to the housing market, the insight we economists offer is hardly ever worth following by somebody contemplating buying or selling. Individual decisions about house purchases almost always reflect individual circumstances regarding job security, lifetime family plans, availability of finance, and so on. Only sometimes should people pay very close attention to what us economists say about the housing market and we have just come through such a period.

We have all seen stories of house prices falling sharply overseas and there have been strong concerns expressed by a few uninformed people that house prices would also plummet in New Zealand. Through last year and the early part of this year we were at pains to point out that the economic fundamentals affecting the housing market in New Zealand are completely different from those overseas and it would be unreasonable to expect anything remotely approaching 30% to 40% declines in prices happening in some other countries.

Now we have seen our expectations play out with average house prices in New Zealand down only 9% in the past year and monthly numbers showing a surge in turnover since March with renewed interest from investors and also some first home buyers coming back into the market. It looks like prices have stabilised.

Given the fact we can see some signs of life in the world economy and the New Zealand economy, and taking into account the upturn in the housing market, we have now passed the point where people need to pay a lot of attention to what us economists say about the housing market. The housing market has done its decline and now we are simply looking at an environment over the next few years where prices rise relatively gradually under pressure from above-average population growth, below average interest rates for the next 12 to 18 months, and a shortage of dwellings.

The opportunity for investors to pick up an absolute bargain has by and large passed although there will still be some opportunities as rising unemployment forces more of the inexperienced and undercapitalised small investors to quit the properties they purchased over the past three years hoping for a quick capital gain. Our recommendation for first home buyers to sit on their hands has also passed its use by date now that prices have stabilised.

Sad to say, from an analyst’s point of view, the interesting part of New Zealand’s housing cycle has now been and gone. Over the next 2 to 5 years our housing market commentary is going to be along the lines of how wonderful it is that New Zealand escaped the price crashes overseas, how house prices are still overvalued, how price gains will be present but limited, and one other thing which is soon likely to dominate housing policy.

We have a housing shortage in New Zealand which is getting worse and worse. As accelerating population growth bumps up against housing construction at its lowest levels in decades big concerns about housing affordability are going to reappear. How long before another select committee review of the problem?

*Tony Alexander is the BNZ’s chief economist.

Source: NZ Herald

A June snapshot of the residential property market showed stability returning, says one of New Zealand’s leading property websites.

According to the website’s June report, released today, the number of new listings declined for the fourth consecutive month and was down 24 per cent compared to June 2008.

Reduced listings meant the available inventory of residential property - measured in terms of the number of weeks of average sales it would take to “clear” the market - fell to 31.5 weeks, a 37 per cent drop from the 50.2 weeks level of June 2008.

The combined drop in new listings and available inventory was a major turn-around from the stagnated market of six or nine months ago, said the websites chief executive Alistair Helm.

Property sales were then at record low levels and the lack of buying interest meant available inventory had built up to over 52 weeks of average sales .

With sales volumes on the rise but the stock of available properties reduced, it could mean that after the traditional quiet winter period the market could become very active in spring, Mr Helm said.

“It looks like by September this year we are likely to have a growing number of spring home buyers chasing a falling number of properties on the market.

“If the downward trend in inventory continues, at some point this could lead to price pressure creeping back into some pockets of the market. This has to be the eventual outcome.

“The long-held fears that we might see a fall of up to 30 per cent in house prices have proven to be unfounded. It is hard to predict, but I don’t see any immediate signs of prices dropping any further.”

Source: NZ Herald

The upsurge in net immigration gathered pace last month, with the largest net inflow since July 2003.

The net gain of 2700, seasonally adjusted, pushed the annual increase to 11,200, which is in line with the average increase of 11,400 since 1990.

But that masks the rate at which the net inflow of migrants is accelerating. The net gain of the past three months was 6600, up from 2800 over the preceding three months and a net outflow of 200 in three months before that.

It largely reflects fewer New Zealanders leaving for Australia and Britain, down 1500 (38 per cent) and 500 (36 per cent) respectively on May last year.

On the incoming side a 200 (10 per cent) increase in returning expatriates offset a decline of 300 (6 per cent) in the number of immigrants.

Economists see the pick-up in net migration as underpinning consumer spending and the demand for housing. It also expands the potential workforce but they see the boost to the demand side of the economy as faster acting than the boost to the supply side.

“Net migration was one of the key drivers behind the 2003 to 2007 economic upswing and was particularly important for the construction sector,” said Goldman Sachs JB Were economist Bernard Doyle.

“The longer net migration persists around these levels the more optimistic we become on the prospects for the domestic economy.”

UBS economist Robin Clements said the migration gain was positive for housing demand, reinforcing the improvement in affordability from lower mortgage rates and house prices.

ASB economist Jane Turner said Australia’s unemployment rate had been rising at a similar pace to New Zealand’s and with a more challenging labour market, New Zealanders were playing it safe and staying put.

“Departures to the UK have also slowed considerably, suggesting the number of young Kiwis heading on their OE [has dropped markedly].”

A Treasury research paper in April illustrated the importance of immigration to the labour supply by pointing out that some 23 per cent of the population was born overseas.

At the same time 11 per cent of New Zealand-born people live in Australia.

Between 2005 and 2007 12 per cent of migrants came to study.

Many stay on; 9 per cent of permanent migrants (those here for at least a year) move on to resident status directly from a student visa.

Source: NZ Herald

New Zealand has been described as a “paradise” by British expats who moved here for a warmer climate and cheaper cost of living.

A NatWest International bank survey of more than 2000 British immigrants living in 12 countries found that Britons in New Zealand rated the country highly in all areas.

In the quality-of-life index, New Zealand came ahead of Canada, which topped the poll last year.

Respondents said NZ had one of the lowest average property prices in the developed world, and many cited lower taxes than in Britain, a better quality of life and less stress as benefits.

A favourable tax regime meant that although average wages were lower, earnings went further.

NatWest International personal banking head Dave Isley said expats reported they were living healthier lifestyles while benefiting financially.

The average salary in New Zealand was $28,427, compared with $65,841 in Britain, but the average cost of a home was only $293,000, compared with $592,000 in Britain.

In both countries an average property cost the equivalent of roughly 10 years’ wages, but Britons who sell their houses find themselves with much more cash in hand when arriving in New Zealand.

Two years ago, Chris and Janice Gorman shifted from a three-bedroom house in Surrey to a four-bedroom house with a sprawling garden near the sea in Auckland.

“New Zealand and the UK are roughly the same size, but there are 56 million fewer people,” Mr Gorman said. “It makes a massive difference. Everyone has time for you.

“We find it much more sociable here. There is a huge emphasis on family life and relaxation time.”

The Gormans, who are two of more than 200,000 British-born Kiwis, said their only regret was not being able to visit family in the UK “on a whim”.

Of all the expatriates surveyed, 86 per cent believed their lives were better than before they emigrated and 92 per cent said they were happier.

Despite the global recession, 87 per cent were better off, including engineers, teachers, economists, accountants, IT professionals and those working in financial services and marketing.

“Despite the global slowdown affecting everyone, the potential to earn more money abroad is clearly one of the main benefits expats are experiencing,” said Mr Isley.

New Zealand and Canada were followed in the poll by Australia, France, the United Arab Emirates, Portugal, Spain, South Africa, the US and China. Singapore and Hong Kong came last.

- NZPA

Source: The Daily Move Channel
New research has revealed that residential property prices in the Land of the Long White Cloud are continuing to stabilise and values improved by a considerable amount last month, giving hope that the New Zealand market is bouncing back from the brink…

With both volume and median sale price of houses changing, economists are saying the property market - a leading indicator of the whole New Zealand economy - is slowly improving.

The QV national residential property index for May highlighted a more positive future for the New Zealand property market.

After months of falls, prices now appear to be stabilising and the index shows a dramatic improvement in values.

Overall property prices fell by 8.1 per cent over the past year - an improvement on the 9.2 per cent decline reported for the year to April and was the second month in a row where the year-on-year change had improved.

The Real Estate Institute of New Zealand (REINZ) said that the number of houses sold was up nearly 40 percent on last April, though turnover fell seven per cent from March to 6210.

The national average sale price fell to $371,600NZD in May from $373,100NZD in April and was 4.1 per cent lower than the same time a year ago.

This drop in sale prices is being attributed to an increase in activity at the lower end of the market - of late, minimal activity has artificially inflated prices but now that is set to change.

New Zealand cities were also celebrating as the British Economist survey ranked two major NZ centres - Auckland and Wellington - as amongst the most liveable cities in the world.

Property values in all main cities increased slightly in recent months possibly due to the low interest rates on offer, causing people to return to the market.

QV’s Glenda Whitehead said, “It is clear that investors are now back in the market along with first time buyers and those looking to upgrade.

“This improvement is due to the continued stabilisation of property values in recent months and contrasts significantly to a market that was declining sharply 12 months ago.”

The median of 42 days to sell a house in April improved slightly on the 44 days it took in March and in April 2008, and significantly from February’s 55 days.

House sales continued to be strongest in the under $400,000NZD price bracket, accounting for nearly 4000 of the total April sales.

As New Zealand is now well into winter (whilst us Brits enjoy our baking hot barbecue summer?!) property transactions will begin to slow once more.

“This seasonal decline will provide a true test as to whether the recent property market revival will continue,” concluded Ms Whitehead.

Source: stuff.co.nz

Auckland and Wellington placed 12th and 23rd respectively in a British survey ranking the liveability of 140 of the world’s major centres.

The top city was Vancouver in Canada while the Austrian city of Vienna came second in the Economist Intelligence Unit’s 2009 Liveability survey.

Melbourne ranked third.

The survey assessed 140 cities based on stability, health care, education, infrastructure and culture and environment, giving each one a rating out of 100.

Perth was equal fifth with Calgary in Canada, with Sydney sharing ninth place with Zurich in Switzerland and Brisbane in 16th place.

As well as Vancouver and Calgary, Canadian cities also featured strongly in the top 20, with Toronto (4th) and Montreal (17th).

US centres were well down the list. Pittsburgh ranked highest, in 29th place.

The highest-ranked Asian city was Osaka in Japan (13th). The next highest was Hong Kong (equal 39th with Madrid, Spain) followed by Singapore (54th) and Seoul, South Korea (58th).

The worst city to live on earth is Harare, the strife-torn capital of Zimbabwe.

“The performance of Asian cities reflects the diverse levels of development throughout the region,” EIU spokesman Jon Copestake said.

“Australian cities represent many of the best aspects of liveability, while instability in countries like Pakistan and Bangladesh means that cities in South Asia fare much worse.”

The Economist Intelligence Unit is a branch of The Economist Group, which publishes The Economist, a weekly news magazine, in London.

- NZPA

Source: stuff.co.nz

Households could collectively save 2 per cent of their annual disposable income next year when they refix their mortgages at lower rates.

The New Zealand Institute of Economic Research predicts that 35 per cent of all mortgages by value will be refinanced over the next year, cutting the total interest bill by around $2 billion.

Not everyone would benefit, the institute cautions, as only a third of households have a mortgage. “There will be some people who will be receiving a significant windfall gain,” said NZIER chief economist Shamubeel Eaqub.

That “considerable boost” to people’s pockets would be needed. The NZIER believes income will be reduced on average by about $10,500 per person in the next five years.

Positives for the housing market were rising net migration and the low interest rates. With evidence that house sales were gaining traction, the institute said the preconditions were in place for a property market recovery but the biggest risk was job insecurity.

“We’re now starting to see some signs that things are bottoming out,” said Mr Eaqub. “There’s a lot of stimulus in the pipeline but we need to keep in mind that the labour market is weak and that there may still be unwillingness to borrow, and to lend.”

House-building was expected to remain in the doldrums for a while. The sector was set to contract by 35 per cent in the March 2010 year, compounding a near 27 per cent fall in the year to March this year.

Annual residential consents have virtually halved from around 26,000 mid-last year but are projected to almost recover by 2013. They are expected to hit about 17,000 this year, due in part to increasing net migration and encouraging interest rates.

Twenty-seven of the Philippine-based Global Property Guide’s 32 surveyed countries recorded price falls in real terms.

Twelve countries recorded declines of more than 10 per cent, with Latvia plunging the most at 50 per cent. Dubai was next at 35 per cent and Singapore and Ireland at 22.7 per cent and 20.4 per cent respectively.

New Zealand’s property prices slid 6.33 per cent, compared to a fall of 1.22 per cent for the year to March 2008. Australian house prices fell nearly 9 per cent.

Only five countries experienced house price rises, with Switzerland topping the chart at 4.3 per cent and 3.5 per cent in Thailand.

The guide said there was no clear sign of recovery in the market which started it all, the US. An inflation adjusted housing index there dropped 19 per cent.

Source: NZ Herald

New Zealand has been judged the most peaceful nation in the world.

An Australian thinktank recognised our stable political situation, relatively low rate of violence and decrease in military spending.

The Institute for Economics and Peace list was created after the start of the global recession, finding the financial meltdown was dragging the world toward political instability and conflict.

It laid out its key findings ahead of the publication of its annual Global Peace Index, a report prepared with the Economist Intelligence Unit.

The report, which surveyed 144 countries, says New Zealand’s rise to first is partly explained by the election of a National-Act coalition last year.

“The centre-right National Party has a strong popular mandate and a robust parliamentary majority by New Zealand’s standards, putting the new Prime Minister, John Key, in a good position to push through his agenda.”

It also says New Zealand received the best possible scores for the likelihood of violent demonstrations, the homicide rate and the level of respect for human rights.

The rise to first position is also related to the fall of Iceland from the top spot last year, which reflected the increase in violence following the banking collapse that engulfed its economy in September.

Professor Kevin Clements from the University of Otago, who was on the panel of experts for the index, told the Herald: “The index is a pretty good reflection of countries people want to live in, because on bicultural issues and a variety of factors we are scoring well.

“If you look at the top 20, they are all small nations based on strong welfare principles, all with good and relatively uncorrupt governance.”

Professor Clements, who is director of the National Centre for Peace and Conflict Studies, said the National Government faced a challenge in preserving New Zealand’s top ranking.

“The question is whether the current Government will be as committed as the last … a role for New Zealand as a conflict-resolving nation. I will be interested to see if we rank as high, but I can’t imagine we’ll slip far.”

He said the greatest threat to New Zealand’s peacefulness would be a more severe economic downturn or an increased sense of grievance toward Treaty of Waitangi issues.

Top 10 most peaceful nations

1. New Zealand
2. Denmark
2. Norway
4. Iceland
5. Austria
6. Sweden
7. Japan
8. Canada
9. Finland
9. Slovenia

Ten least peaceful
1. Iraq
2. Afghanistan
3. Somalia
4. Israel
5. Sudan
6. Democratic Republic of the Congo
7. Chad
8. Pakistan
9. Russia
10. Zimbabwe

Source: NZ Herald

The housing market, which has been depressed for the past 18 months, appears to have bottomed out - at least in Auckland.

Though prices remain soft, the number of reported sales has risen in the past month and far fewer properties have been passed in at auction.

The apparent change of heart reflects not so much the state of the economy but a slow turnaround in consumer confidence brought about by record low interest rates and greater housing affordability, especially for first-home buyers.

This is reflected in the latest ASB housing confidence survey, which shows that in the past nine months those surveyed have become increasingly attracted to the housing market. For the most recent quarter - the three months to April - 59 per cent of respondents felt it was a good time to buy a house, compared with 53 per cent in the previous quarter.

ASB chief economist Nick Tuffey says the improved sentiment appears to be closely linked to the dramatic fall in interest rates in the past year.

According to Auckland’s largest real estate agency, the region’s housing market continued to surge in April, following better-than-expected performances in February and March. The average house price was $502,726, up 2.2 per cent on March. The number of sales at 809 was 79 per cent up on those for the same month last year.

Source: Sunday Star Times

Want to buy a house? You could face stiff competition from offshore buyers.

Last month a third of all session searches on one of New Zealand’s leading property websites were from outside New Zealand - with increasing interest from Spain, China, Russia and the United Emirates.

The property website lists houses for sale and rent in New Zealand and last month had 134,604 session visits from people looking at properties for sale and 25,902 from those interested in renting. Chief executive Alistair Helm said monitoring where the searches originated revealed intriguing trends.

The proportion of international visitors to the site has grown from 25 percent to 30 percent in the two years since it launched, largely in response to the website’s growth and increasing visibility in Google searches.

The bulk of overseas visits to the site had consistently come from Australia, the UK and the US. But more recently there was a large jump in the numbers of curious visitors from Spain and China - representing a 200 percent increase in traffic. Visits from people in Russia and the United Arab Emirates had also increased.

Helm said he expected some of the increased traffic came from expats who had been attracted to working in places such as Dubai but were now returning to New Zealand.

The interest from China and Russia was likely to be a response to increasing wealth in those countries. Helm thought the 2007 America’s Cup races in Valencia may have raised Spain’s awareness of New Zealand.

Latest figures show net migration in New Zealand has climbed to the highest level in five years, with permanent and long-term arrivals exceeding departures in April on a seasonally adjusted basis.

Helm said international interest in the rental market was also high, perhaps suggesting that immigrants were looking to rent first before buying.

New Zealand property is also well represented on overseas websites such as the UK’s www.rightmove.co.uk, which last week had 386 Kiwi properties, including a listing for apartments in Manukau which sung the praises of the South Auckland city’s blend of urban, rural and seaside communities, “just 20 minutes from downtown Auckland”.