August 2009

The average time it takes to sell a residential property in New Zealand fell sharply in July, compared to the corresponding month in 2008, acting as a further indicator that the New Zealand property market is on the mend.

Fresh data released by a leading New Zealand mortgage company shows that their property cycle indicator increased to an optimistic 5.95 last month, up from 3.98 in June.

The New Zealand house market gauge takes into account changes in the number of New Zealand homes sold, changes in New Zealand property prices and the time taken for New Zealand properties to sell. It runs from -10 for a strong decline to +10 for strong growth.

The average property in New Zealand took an average of 37 days to sell in July, a staggering 21 days lower than the same time last year, and the greatest year-on-year improvement since records began in 1991.

Around 6,000 homes in New Zealand were sold in July, a similar number to that recorded in June, but up 34% year-on-year.

The average price of a home in New Zealand also held steady at $340,000 (£142,300) in July, which is similar to that recorded during the same period last year.

29 May 2009

Source: Business Day

Residential building activity surged 11 percent last month in further evidence that the housing market slump may have levelled off.

Statistics New Zealand said today that approvals to build 1009 new dwellings were given in the month. The seasonally-adjusted 11 percent rise this figure gives follows a 1.7 percent drop in March.

Excluding apartments, there were 810 new residences approved for construction during April, which is a 4.5 percent seasonally-adjusted rise on the previous month.

Building activity has been slumping since mid-2007, falling about 45 percent from the very high levels seen during the housing boom in the middle of the decade. In the year to April building consents worth $5.34 billion were issued, which is 31 percent lower that the figure for the previous 12 month period.

Today’s figures will add weight to the belief that New Zealand has now seen the worst of a recession that it has been in since the start of 2008.

The National Bank’s monthly survey of business opinion out this week showed a continued rise in optimism among firms.

Some economists believe that there will be quite a strong bounce in construction later this year. Those believing this cite a big turnaround in migration statistics, with few Kiwis leaving the country to live and still increasing - albeit slowly - numbers of foreigners coming here. A key driver of the strong housing market in the earlier 2000s was a big inflow of migrants in the wake of the 2001 terrorist attacks in the US.

While house prices have dropped on average about 10 percent from their peaks of a few years ago, recent real estate figures have shown a levelling in prices and a strong bounce-back in the number of houses being sold.

ASB economist Jane Turner took a cautious view of the latest figures, saying that the construction sector was still very weak.

She believed, however, that residential building consent figures were likely to improve further over the next few months, in line with the pick up in house sales.

“The turn around in population growth, stabilising house prices and lower interest rates are likely to help lift construction demand off its lows,” she said.

“Nonetheless, economic uncertainty and rising unemployment are likely to be factors that will limit the degree of recovery in housing construction.”
Residential building activity surged 11 percent last month in further evidence that the housing market slump may have levelled off.

Statistics New Zealand said today that approvals to build 1009 new dwellings were given in the month. The seasonally-adjusted 11 percent rise this figure gives follows a 1.7 percent drop in March.

Excluding apartments, there were 810 new residences approved for construction during April, which is a 4.5 percent seasonally-adjusted rise on the previous month.

Building activity has been slumping since mid-2007, falling about 45 percent from the very high levels seen during the housing boom in the middle of the decade. In the year to April building consents worth $5.34 billion were issued, which is 31 percent lower that the figure for the previous 12 month period.

Today’s figures will add weight to the belief that New Zealand has now seen the worst of a recession that it has been in since the start of 2008.

The National Bank’s monthly survey of business opinion out this week showed a continued rise in optimism among firms.

Some economists believe that there will be quite a strong bounce in construction later this year. Those believing this cite a big turnaround in migration statistics, with few Kiwis leaving the country to live and still increasing - albeit slowly - numbers of foreigners coming here. A key driver of the strong housing market in the earlier 2000s was a big inflow of migrants in the wake of the 2001 terrorist attacks in the US.

While house prices have dropped on average about 10 percent from their peaks of a few years ago, recent real estate figures have shown a levelling in prices and a strong bounce-back in the number of houses being sold.

ASB economist Jane Turner took a cautious view of the latest figures, saying that the construction sector was still very weak.

She believed, however, that residential building consent figures were likely to improve further over the next few months, in line with the pick up in house sales.

“The turn around in population growth, stabilising house prices and lower interest rates are likely to help lift construction demand off its lows,” she said.

“Nonetheless, economic uncertainty and rising unemployment are likely to be factors that will limit the degree of recovery in housing construction.”

13 May 2009

Source: Newstalk ZB

The worst of the housing slump may be behind us, as figures show house prices growing slowly across the country.

The median house price has risen $10,000 to $340,000 since February.

The estimated number of house sales rose 17.9 percent month-on-month in April, following a 9.2 percent month-on-month increase in March. The level of sales activity has lifted 57 percent since November and now stands at the highest level seen since November 2007. However, activity remains about 14 percent below the average level seen over the past decade.

Auckland seems to be leading the market, with sales in Auckland now up 54.1 percent year-on-year while sales outside of Auckland rose 32.6 percent year-on-year. Sales in Wellington were up 23.8 percent year-on-year.

Darren Gibbs from Deutsche Bank says activity levels have now clearly moved off the historic lows seen last year as households quickly respond to the very low interest rates on offer.

“We wonder whether the recovery in activity can progress much further in 2009 (although we have penciled in a 5% month-on-month rise in sales in May) in light of the general weakness we are still observing across most of the economy, including a deterioration in labour market conditions. We will certainly be watching this data very closely over coming months.”

But he says the recovery in house sales point to a much brighter outlook for retailers and residential home builders towards the end of this year.

“This is consistent with our view that the economy will return to positive GDP growth in the final quarter of this year provided that global economic and financial conditions stabilize in line with our projections. ”

Deutsche Bank says the Reserve Bank should hold the official cash rate at current levels until around the middle of the year and not the latter part of next year as the RBNZ suggested last month.

12 May 2009

Source: NZPA

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

The median house price fell 1.4 percent to $340,000 in April from a year earlier, although it continued the slow recovery seen in recent months, the Real Estate Institute of New Zealand (REINZ) said today.

The number of houses sold was up nearly 40 percent on last April, though turnover fell 7 percent from March to 6210.

T his slow turn-around was the market responding to the very low interest rates being offered, Deutsche Bank spokesman Darren Gibbs said.

However, he wondered if the recovery would progress further in 2009, given the general weakness of the rest of the economy — though the bank was expecting a five percent month-on-month rise for May, he said.

“This is consistent with our view that the economy will return to positive GDP growth in the final quarter of this year, provided that global economic and financial conditions stabilise ,” Mr Gibbs said.

With increased, “pent up” demand, met by a similarly withheld supply, the economist expected prices to be a little lower than recorded this month, before stabilising next year.

Goldman Sachs strategist Bernard Doyle said house sales were a reliable leading indicator for the domestic economy.

Also, the sales figures hinted at a possible imminent construction boom, he said.

“When NZ was last turning over 6500 houses per month, new construction was running at 24,000 consents annualised, versus 12,000 currently,” he said.

The rebounding activity strengthened Goldman Sachs’s opinion domestic demand will increase through the second half of 2009, he said.

The median house price rose 1.5 percent from March, and was also higher than February’s $330,000, REINZ president Mike Elford said.

The median price dropped in most regions aside from Taranaki, where it rose slightly to $270,000, and Waikato/Bay of Plenty, where it was unchanged.

April was traditionally a slower month due to school holidays and seasonal adjustments, Mr Elford said.

“The figures are not hugely significant, but enough to generate a degree of optimism about the way forward from here,”

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 $400,000 price bracket, accounting for nearly 4000 of the total April sales.

11 May 2009

Source: stuff.co.nz

The decline in property values has improved for the first time since September 2007, suggesting the housing market freefall could soon be over.

Quotable Value monthly statistics showed national property values decreased 9.2 per cent in the year ending April 30 a slight improvement on the 9.3 per cent reported in March.

QV spokesman Blue Hancock said the April figure was because of a stabilisation in prices paid during the past few months.

Property values in the main centres had flattened, with figures for Wellington, Auckland, Hamilton, Christchurch and Dunedin all improving.

Tauranga was the only main centre to decline.

Prices in most provincial centres had also steadied, prompting an improvement in figures for Rotorua, New Plymouth and Palmerston North. Figures for Napier, Hastings, Wanganui, Nelson and Marlborough had worsened.

Increased sales activity in February and March had carried through into April, resulting in a shortage of listings, particularly in lower-value properties, Mr Hancock said.

“Lower interest rates and cheaper properties are leading first-home buyers and investors back into the market.”

Homeowners were also weighing up their situation, with some choosing to stay put and renovate, while others saw great opportunities to upgrade as the upper end of the market became more affordable, he said.

“Recent stabilisation of property values in many areas suggests that we may be near the bottom of the market.”

QV expected values to remain relatively flat over the winter months, but the threat of rising unemployment could affect an increasing number of homeowners and potential home buyers lowering values again.

Property values in Wellington fell 8.5 per cent in the year to April, a recovery on the 8.7 per cent reported in March.

QV Wellington valuer Pieter Geill said a potential drop in supply in the next few months could boost property values in the region.

Some homeowners continued to feel the pinch, leading to forced or pressed sales, he said.

“There is still some good buying out there.”

Tommy’s Real Estate director Tommy Heptinstall said there was a definite shortage in house sales listings.

“People have been reading all the doom and gloom and they are terrified to sell. But there is still the same amount of buyers in the marketplace.”

The average sale price dropped from $378,399 in March to $372,981 in April, due to more sales at the lower end of the market.

National property values are 9.6 per cent below their peak in January 2008.

House property values in Napier and Hastings fell 10.2 per cent and 9.7 per cent respectively in the year to April.

Values in Wanganui dropped 3.8 per cent and they slid 10.2 per cent in Palmerston North.

Figures for Nelson and Marlborough fell 7.6 per cent and 10.1 per cent respectively.

1 May 2009

Source: NZPA

New listings of houses for sale fell sharply last month, hinting at the possibility the buyers’ market for residential property could be coming to an end.

Nationwide there were 10,453 new house listings in April, down 34 percent from a year earlier and down 21 percent on March, listing site Realestate.co.nz reported today in its monthly survey NZ Property Report.

“The New Zealand property market has been a buyers’ market for the last 18 months, however this is a significant drop in new listings prior to winter,” chief executive Alistair Helm said.

“The reduced inventory will start to favour sellers, and could result in upward pressure on prices in coming months.”

No part of the country escaped the drop in new house listings, with the biggest fall in Northland where the reduction was 56 percent from a year earlier. Nelson had the smallest fall, down 5 percent.

Asking price expectations for new listings showed little change.

The truncated mean asking price, which decreases the influence of extreme values, was $405,936 last month.

That was little changed from $405,710 in March, and down 1.7 percent from $412,903 in April 2008.

3 May 2009

Source: NZ Herald

A cautious murmur of optimism can be heard from some economists, property companies and estate agents: they are hoping that a slight upturn in house sales may herald the start of the recovery.

Two new reports, one from the Real Estate Institute and one from Crockers Property Group, offer the first signs that house prices may be rising.

The NZ Property Report, published by the Real Estate Institute and a group of big estate agencies, shows a sharp decrease in the number of properties listed for sale around New Zealand, an indication that the buyers’ market of the past year may be turning to favour sellers.

And the Crockers report shows stronger sales in March, especially in Auckland, aided by population growth and expats coming home.

The reports come after Tony Alexander, the BNZ’s chief economist, told buyers they shouldn’t risk holding off in the expectation of lower prices.

The trends are far from certain, and most experts agree it’s too early to confirm an upturn.

A dramatic decrease in the number of properties listed for sale in April suggests New Zealand could be turning to a sellers’ market says the monthly NZ Property report released by www.realestate.co.nz.

However the report’s conclusions has been refuted by some property experts saying it’s too early to tell.

The Real Estate Institute report shows 10,453 properties were listed in April, a decrease of 21 per cent from March and 34 per cent from the same time last year.

“The New Zealand property market has been a buyer’s market for 18 months; however this is a significant drop in new listings,” said Alistair Helm, chief executive of realestate.co.nz.

Glenda Whitehead, Auckland valuer for QV Valuations, said the market was a happier place than it had been in the past 12 months, but, “it’s too early to suggest a dynamic shift”.

BUYERS PAYING TOO MUCH
Mortgagee auctions are no longer the steal that buyers hope for.

Mortgagee sales have exploded in recent months as more struggling homeowners are pushed into selling, but experts say buyers are paying too much at the auctions.

A Barfoot & Thompson mortgagee auction this week attracted more than 70 people to the sale of four Auckland houses, and one North Shore section.

The Browns Bay section didn’t sell, and the four houses sold for barely $50,000 below their official valuations - hardly the fire sale that first-time buyers may expect.

Despite the large turnout, the auction room was eerily silent as the first bids were called for a four bedroom home in Dannemora.

The bidding slowly crept its way up to sell at $450,000 $60,000 under the official valuation.

The second property, another four-bedroom Dannemora home, sold for $445,000, while a third house just down the street sold for $415,000.

The fourth property, a one-level rear unit in Avondale, sold for $252,000.

12 April 2009

Source: NZ Herald

For years, the common refrain from potential home buyers has been that it’s cheaper to rent than buy.

The sharp rise in house prices from 2003 to the end of 2007, combined with a rise in the two-year fixed mortgage rate from 6 per cent to almost 10 per cent over the same period, seemed to be the death knell for many dreams of home ownership.

But that picture has changed dramatically in the past year as interest rates have fallen, house prices have fallen, rents have remained broadly stable and after-tax pay has improved because of wage growth and tax cuts.

Analysis by interest.co.nz shows it’s now cheaper for a typical first home buyer’s household to buy than to rent, when rates, maintenance and insurance costs are excluded. It also excludes the opportunity cost of interest earned on a deposit amount instead sunk into a property.

Measuring these costs is important, but we haven’t yet found typical measures given the variances in rates bills, insurance and maintenance depending on the type and location of property.

But the picture is clear. The major cost of home ownership - interest costs on a mortgage of 80 per cent of a first-quartile home (ie the midpoint between the lowest-priced houses and the median house price) were around 1.5 per cent less than the rent on a similar-sized house in January and February.

This is the first time since we started collecting the data at the beginning of 2006 that it’s cheaper to buy than to rent and is a major improvement on the 10.3 per cent premium for buying over renting in November 2007.

We’re assuming this first home buyer’s household is made up of two 25 to 29-year-olds, median salary earners considering moving into a median-priced three-bedroom rental house rather than buying a first-quartile priced house. This is the “classic” couple at that point where they’re considering starting a family.

This is where the dream of home ownership is most potent and we think the decision-making point is most concentrated. We’ve heard repeatedly in recent years how couples in their mid- to late-20s have come to this point and decided to leave New Zealand because there was no hope they could buy a home and start a family.

I’m sure it was one of the driving factors in the exodus of young New Zealanders (and their parents) to Australia in the past three years.

Our calculations show this couple now earns $1307.87 after tax each week, up from $1221.13 a week in November 2007, when house prices peaked.

Then, the mortgage payments on an 80 per cent mortgage for a first-quartile home were 34.9 per cent of take-home pay. The rent on a three-bedroom home soaked up 24.6 per cent of after-tax pay. So the advantage of renting was essentially worth 10.1 per cent of net pay.

Now that gap has narrowed to the point in February where it has become negative for the first time. It now takes 23.7 per cent of after-tax pay to afford the rent on a three-bedroom house, while it takes 22.3 per cent to afford the mortgage.

Obviously, the costs of maintenance, insurance and rates will mean it is still more expensive to own a home, but it is now within that margin of error where the heart can conquer the head.

Another way of describing it is to say the footloose and fancy-free husband no longer has any good excuses to put off the nesting instincts of the wife. In other words, it’s time for another baby boom. (Complaints please to bernard.hickey@interest.co.nz).
So what might this all mean for the property market and New Zealand’s demographics?

For years, real estate agents have told first home buyers that rent was “wasted” money that could be put to better use in “compulsory saving” on the mortgage. Of course, this isn’t strictly true and pointing out the the obvious extra expense of a home loan made for an easy rebuff. Not for much longer.

But it may not contribute to a rebound in house prices. Banks are now tougher with their lending criteria, particularly for those wanting to borrow more than 80 per cent of the value of a home. The lure in days gone by of easy capital gains has also evaporated, discouraging the sort of highly leveraged first home buying seen through 2005, 2006 and 2007.

Sales volumes, however, are already picking up as first home buyers dip their toes back in the real estate market to snap up bargains from distressed sellers.

This shift in the rent-versus-buy calculation is also great news for New Zealand’s population trends, discouraging migration of New Zealand-born citizens and encouraging family formation, with all the social benefits that entails.

It all depends on house prices continuing to fall, interest rates staying low and incomes continuing to rise. This analysis also excludes the effects of rising unemployment. That may be the variable that renders this structural change in our economy redundant for now.

12 April 2009

Source: NZ Herald

Home buyers - including expats with an eye for a bargain - have returned to the market in strength, hunting both high end and investment property.

International traffic to Trade Me Property surged 21 per cent last month. Brendon Skipper, head of Trade Me Property, says expats are “looking for a job, looking for a car and looking for a property” on the site.

Megan Jaffe, owner of the Ray White franchise in Auckland’s swanky Remuera, says with expats buying, sales have picked up on top-end houses.

Ray White’s March sales figures rebounded strongly, soaring 44.1 per cent. Chief executive Carey Smith says the hottest spots are Northland, Auckland, and the upper South Island; especially Christchurch, where investor activity is humming in the under $300,000 segment.

Babette Newman, Bayleys’ Wellington residential manager, says there’s a “huge increase” in attendees at open homes and multiple offers being made on properties in the capital too - particularly those over $800,000.

Typical responses in BNZ’s latest confidence survey, which compiles feedback from around the country, included: “Property investment is going crazy … Have had more than 100 people through most properties in the first weekend of open homes … Everything is booming under $400,000 with homes being snapped up in just a few days from listing and multi-offers across many properties.”

For the past four weeks, Barfoot & Thompson has averaged a 65-70 per cent auction clearance rate. Six months ago, this had reached an all-time low of 30-35 per cent.

Director Peter Thompson says: “The auction room in the city on Wednesdays has witnessed activity never seen before in these premises - standing room only spilling out into the foyer,” and only a small portion of these are mortgagee auctions.

Ray White’s Smith reports a 68 per cent auction clearance rate - again a doubling from last year.

Residential real estate is once more “so alive,” Jaffe says. “The investors are back; open homes are full, listings are short - and there’s buyer competition.” Alistair Helm, chief executive of realestate.co.nz, confirms new listings in March fell 19 per cent compared to a year earlier.

The local housing market is benefiting from tough economic conditions abroad, says John Wills of Custom Residential.

Broker Charlotte Lockhart of Mike Pero Mortgages, who’s arranging finance for expat buyers weekly - mostly those living in the UK - doesn’t think expats feel their money is safe there.

Looking for a place to put it, they’re settling for a bolthole back home while the exchange rate is favourable. Realestate.co.nz’s Helm reports an 11 per cent increase in website visitors from the UK viewing rental properties.

Wills says Custom Residential’s website has seen a “massive increase” in offshore inquiry about properties in the hotspot of greater Ponsonby. Total traffic volume more than doubled during February and March.

“Kiwi professionals are returning home and having to compete with existing local buyers for the best property,” he says, with the “executive” home buyer demographic being “incredibly active” on the greater Ponsonby house-hunting circuit.

Wills says of the surge in active buyers: “It feels a bit like going ‘back to the future’, with open home numbers and a buyer pool similar to what we saw in 2005 and 2006.”

Competition for good property is “one step away from being described as fierce,” he says - but heading in that direction. In the meantime, he says most properties listed with his agency become the subject of multi-offer negotiations. For one recently listed property, the first open homes were held on Saturday and Sunday of the same weekend, and four offers were made on the Monday.

An agreement was reached about 9.30pm that evening. “This is quite typical of what we are experiencing out there at the moment,” says Wills, reminiscent of the activity peak during the last boom.

The question is whether what he calls the market’s “serious momentum” will continue through winter.

Smith says it can’t be underestimated that “sales create sales”. The favoured two-year mortgage interest rate remains 2 per cent below its long-term average and the one-year rate almost 3 per cent below average.

The rate of new houses being built has hit a 65-year low, and market watchers agree if immigration remains solid and interest rates stay low the market will continue trading at more normal levels.

Offshore Kiwis quids in

Expat Kiwis Michelle Bradley, an accountant, and her builder fiance Greg Wdowikowski, both in their early 30s, were living and working in London when they decided to buy their first investment property in 2007.

“We saved our deposit and bought a rental property in Hamilton, and it has great rental return of $300 a week.”

Despite the fact they “bought off the internet” without viewing the property, they got a LIM and other property reports beforehand.

They enlisted help from Auckland-based broker Jodi Cottle of Sable Mortgages, who runs regular seminars in the UK for expat buyers looking for property in New Zealand. Seminar numbers are limited to 200 - and they’re always full. Interest in the seminars is so strong, Cottle doesn’t need to advertise them.

With the pound’s favourable exchange rate, Bradley says it was “so much easier for us to do this from Britain than if we were living at home”. A year ago, Bradley won a green card in the US ballot and the couple relocated to New York.

Searching New Zealand websites for new listings daily, they’re about to buy a more expensive “four-bedroom, executive-style home” on Auckland’s North Shore.

“What makes it so enticing is the quality of home that we can buy there on the US dollar, and the lifestyle we may eventually come home to.”

8 April 2009

Source: Stuff.co.nz 

OPINION: Tony Alexander*

Regular readers of this column or my Weekly Overview publication should be aware that my view on the NZ housing market has been quite at odds with the generally very pessimistic views expressed by other commentators – not only for the past year but also since the June quarter of 2004.

Many people have been gleefully predicting 40 percent falls in house prices believing that events have been conspiring to produce greater house price declines here than in even the United States.

Over there they have “only” fallen 29 percent in spite of massive over-building, huge excess lending and borrowing when mortgage rates when down near 2 percent, and now the biggest credit crunch in the US since the 1930s Great depression when the Federal Reserve shrank the US money supply about 30 percent.

Here in New Zealand the fundamentals have never added up to large declines in average house prices and it appears there are literally tens of thousands of people who share this less than apocalyptic view.

For a start we have accelerating population growth courtesy of rising net migration inflows.

When times get tough overseas ex-pats come home, foreigners shift here, and fewer Kiwis leave to seek their fortunes elsewhere.

Between June 2001 and June 2002 our net flow went from -9,000 to +33,000.

So far we have gone from +3,500 in November to +6,200 in February and a total between 15,000 and 30,000 within a year seems an easy call.

We have low interest rates by NZ standards with the two year fixed rate around 1.6 percent below its average for the past five years and our one year rate at 5.49 percent some 2.8 percent below average.

We have a fundamental shortage of accommodation as evidenced by official efforts in the past two years to find ways to speed up construction – the Commerce Committee investigation.

We now however have collapsing construction with the number of consents issued at the lowest levels in perhaps half a century near 12,500 per annum.

We need about 24,000 a year just to meet population growth – let alone house above average migration-driven growth.

The most up to date data show the housing market – let’s say stabilising rather than rising.

Barfoot and Thompson data for Auckland show their sales ahead 46 percent in March from a year ago.

Our own monthly survey has shown a sharp turnaround in real estate comments over the past two months.

Anecdotes bespeak of a rush of investor enquiries, multiple bidders on properties, and shortages of listings appearing in some areas.

There is undoubtedly a short term bounce effect in the data caused by people rushing purchases to take advantage of low interest rates and because they have put their lives on holds too long and simply want to move on.

That is why we think it is only appropriate to speak in terms of the market stabilising rather than rising.

But it will be interesting to see how prices go this year as an existing housing shortage combined with the worst construction levels in living memory for practically all builders runs up against accelerating population growth. You do the math.

Speaking of maths, investors are increasingly finding they can make their properties cash flow positive.

Imagine what the numbers will look like as the accommodation shortage worsens and rents start rising.

After all, even the unemployed need somewhere to live.

So I maintain the position written here at some stage last year.

If I were looking to make a canny purchase in the housing market – whether as an investor or owner-occupier – I would want to do it before the middle of this year.

This is not to say the listings will completely dry up, just that the best bargains will have been well and truly snapped up by then.

Plus, going by the way things are turning overseas, sentiment about the world and NZ economies is likely to be a lot better.

In fact our latest monthly business survey has found a firm lift in sentiment over the past month – as has consumer confidence measured in the Colmar Brunton poll just out.

*Tony Alexander is BNZ’s chief economist.