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.

Source: NZ Herald 

29 Jan 2009

New Zealand now has the lowest Official Cash Rate since its introduction in March 1999, as Reserve Bank Governor Alan Bollard announced a 150 basis point cut.

This cut takes the OCR down to 3.5 per cent, a full percentage point lower than the previous bottom of 4.5 per cent when the rate was first introduced a decade ago.

Alan Bollard has again called on banks and financial institutions to pass on the reductions to their customers.

The money markets have been regarding a cut from 5 to 4 per cent as a near certainty and saw about a 50:50 chance that governor Alan Bollard would drop the rate to 3.5 per cent.

Since last July the Reserve Bank has lowered the OCR by a cumulative 475 basis points, dispensing ever-larger cuts as the flow of economic data, foreign and domestic, has worsened markedly.

In a press statement accompanying the announcement, Bollard said: “The news coming from our trading partners is very negative. The global economy is now in recession and the outlook for international growth has been marked down considerably since our December Monetary Policy Statement.

Inflation pressures were abating, said Bollard. He said the bank had confidence that annual inflation would “be comfortably inside the target band of 1 to 3 per cent over the medium term”.

“Given this backdrop it is appropriate to take the OCR to a more stimulatory position and to deliver this reduction quickly,” he said.

“Today’s decision brings the cumulative reduction in the OCR since July 2008 to 4.75 percentage points. Lower interest rates will have a positive impact on growth, alongside a lower exchange rate and fiscal stimulus, provided firms and households do not unnecessarily contract their spending.”

Bollard again made the point that the bank expected financial institutions to play their part in the “economic adjustment process” by passing on lower wholesale interest rates to their customers.

“This will help New Zealand respond flexibly,” said Bollard.

“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. We would expect any further reductions to be smaller than those seen recently.”

New Zealand now has the lowest Official Cash Rate since its introduction in March 1999, as Reserve Bank Governor Alan Bollard announced a 150 basis point cut.

This cut takes the OCR down to 3.5 per cent, a full percentage point lower than the previous bottom of 4.5 per cent when the rate was first introduced a decade ago.

Alan Bollard has again called on banks and financial institutions to pass on the reductions to their customers.

The money markets have been regarding a cut from 5 to 4 per cent as a near certainty and saw about a 50:50 chance that governor Alan Bollard would drop the rate to 3.5 per cent.

Since last July the Reserve Bank has lowered the OCR by a cumulative 475 basis points, dispensing ever-larger cuts as the flow of economic data, foreign and domestic, has worsened markedly.

In a press statement accompanying the announcement, Bollard said: “The news coming from our trading partners is very negative. The global economy is now in recession and the outlook for international growth has been marked down considerably since our December Monetary Policy Statement.

Inflation pressures were abating, said Bollard. He said the bank had confidence that annual inflation would “be comfortably inside the target band of 1 to 3 per cent over the medium term”.

“Given this backdrop it is appropriate to take the OCR to a more stimulatory position and to deliver this reduction quickly,” he said.

“Today’s decision brings the cumulative reduction in the OCR since July 2008 to 4.75 percentage points. Lower interest rates will have a positive impact on growth, alongside a lower exchange rate and fiscal stimulus, provided firms and households do not unnecessarily contract their spending.”

Bollard again made the point that the bank expected financial institutions to play their part in the “economic adjustment process” by passing on lower wholesale interest rates to their customers.

“This will help New Zealand respond flexibly,” said Bollard.

“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. We would expect any further reductions to be smaller than those seen recently.”

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

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

Friday Nov 14, 2008

House prices in Auckland and nationally are up and agents say a rosier picture of the market is finally beginning to emerge.

Auckland prices rose from a median $420,000 in September to $433,000 last month and the national median nudged up from $330,000 to $335,000.

Real Estate Institute figures out yesterday showed price rises in five out of the 12 regions surveyed nationally. But the country’s national median price is still well under the $350,000 reached in October last year.

Agents selling houses in Northland, Taranaki, Hawkes Bay, Wellington and Southland all enjoyed better prices last month than in September.

“Despite all the negative stuff and people talking about a 30 per cent price drop, this is really good,” said institute vice-president Peter McDonald.

Most Auckland suburban areas showed big price rises.

Waitakere’s median rose from $360,000 in September to $390,000 on the back of 173 sales last month.

Manukau’s was up from $397,000 to $416,000 based on 281 sales.

Papakura recorded 50 sales last month and its median price rose from $293,000 to $301,000.

Agents selling places in the Auckland City Council boundaries recorded 465 sales and a median price rise from $450,000 to $472,000. Sales in the Franklin area pushed up the median from $365,000 in September to $367,000.

North Shore bucked the trend. Based on 249 sales last month, prices dropped from $445,000 to $420,000.

Agents in Rodney district made 97 sales but this area’s median dropped from $440,000 in September to $435,000.

ASB economist Jane Turner said the housing data showed mixed results. “While turnover remains weak at very low levels, the median house price and the median number of days to sell showed some slight improvement.

“Typically, we avoid reading too much into monthly moves in house prices, as the sample is subject to compositional shift.

“However, surprisingly, the median number of days to sell also implied some improvement in the housing market, falling from 56 to 51.

“The number of days to sell is generally a fairly reliable barometer of the balance between supply and demand in the housing market, and the fall is consistent with an improvement in prices.”