December Review Of The Market

The December Property Review.

There was  plenty of news in the media over the past few weeks and I suspect it will get louder and even more political soon because of the elections  towards the end of next year.

Having seen this scenario myself many times before I suggest that  investors had better brace themselves against a barrage of propaganda and some scare mongering as the various political factions try their hardest  to either bribe people to vote for them, or put into them the fear of the Almighty unless heeded.

It’s an old game and the songs are played over and again, with only a change to the lyrics.

For the property market it will be business as usual whatever noises that may come from off stage.

Bear in mind that on the one hand everyone wants more houses built and prices to stabilise.
On the other hand there are dark threats of increasing interest rates and more loan restrictions.

It’s obvious that you can’t have both as they conflict with each other.

If you increase interest rates and throw in more loan restrictions, you will smother any chance of building more affordable houses.

It’s like going to all the trouble of mixing up all the ingredients for a nice cake and then putting it into the fridge to cook.

In my view the rhetoric about higher interest rates and other restrictions is designed to slow a buoyant market by “jaw-boning” and it can work quite well – for a short while only that is.

But the pressure remains from increased immigration, the shortage of houses, the Christchurch re–build and low to moderate interest rates.
I believe what we will have is a healthy pause in the market for a few months, and then the pressure will build up once more.

If a Capital Gains Tax should ever be introduced, as is suggested from some quarters, then prices will likely rise dramatically as property is pulled off the market.

Put simply, you cannot punish the property market and at the same time want it to be efficient and produce more houses.

It simply doesn’t work.

It’s going to be an interesting 12 months.

 

Some recent property news of interest include:

 

 

 

BNZ-REINZ November 2013 Survey

(1) This shows that first home buyers have been left in the dust  by the new Reserve Bank rules.
I would have thought that first home buyers would be at the front of the queue, not at the back.

The RB have since watered the rules down a little but the facts still show how badly the rules are working against the very people who need help the most.

The only good thing, from an investors point of view, is that rents will have pressure put on them and will rise in response.

Yet we have the odd situation where it still possible today to go down the road and buy hundreds of thousands of dollars worth of household furniture, appliances, and gadgets, (not to mention cars) with no money down and 5 years to pay with no interest  for these fast depreciating assets.

Is this not a more corrosive type of debt than putting a roof over the heads of the honest folk who need a home?

 

Extract from BNZ -REINZ survey:

“First Home Buyers Still Disappearing”


Last month we noted in our survey that a net 78% of the 250 responding agents said that they were seeing fewer first home buyers in the marketplace. This month’s 587 respondents have delivered the same result statistically-speaking with a net 77% seeing fewer first home buyers.

This wholesale withdrawal of a class of buyers who earlier this year accounted for near 24% of dwelling sales helps explain why the REINZ sales data for November released last Thursday showed sales to all parties down 6.6% from November 2012.

In fact this month we again asked agents the question regarding what proportion of their sales were to first home buyers. In contrast to the results of 23.6% in March and 23.3% in May the proportion now is only 15.3%. The residential real estate market has been handed over to investors, foreign buyers, and people generally shifting location or trading up or down. In fact a net 5.6% of agents this month report that they are seeing more investors. Last month that result was 6%

A net 16% of agents feel that it is now a buyer’s market and just a net 12.5% now feel prices are rising compared with 22.8% last month and 51.2% in September just before the loan to value ratio rules came into effect.

These remain early days for the LVR regime and it is likely to be many months before things settle down to a new equilibrium. The Reserve Bank looks certain to achieve its primary goal of reducing the proportion of bank lending undertaken at high LVRs. However their subsidiary goal of curtailing the speed of house price rises may be only minimally achieved.
Price pressures in the NZ housing market are likely to remain firm over 2014. Net migration inflows are booming courtesy of a sharp reduction in the attractiveness to Kiwis of shifting to Australia. Leading indicators of employment growth are strong and getting stronger, and although housing supply is rising growth will be limited by a shortage of builders from some point next year.”

link:

http://tonyalexander.co.nz/topics/surveys/bnz-reinz-survey/

 

(2) As predicted by me some months ago home buyers are turning to alternative finance to get top -up money to get on the property ladder.

 

Read:

“New Zealanders forced out of the housing market by new lending restrictions are increasingly turning to finance companies to boost their deposits, new figures show.
Data released by Veda, Australasia’s largest credit reference agency, shows inquiries for personal loans increased 17.7 per cent from September to November compared with the same time in 2012.

link:

http://www.stuff.co.nz/business/money/9525513/Desperate-house-buyers-turn-to-finance-firms

 

(3) Auckland Council Designated New Housing areas:

The Auckland Council has just announced the latest areas for special high density housing – (see below)

This is all very noble but we must not forget that it will be years before the are actually built.

Coupled with that, the list only provides a third of the 30,000 houses that we are told we need now.
Where are the rest coming from?

It’s a good start but I doubt if it will be effective in the short and medium term.

One good thing: no guesses where you should be buying today if you have an eye to the future?

 

The locations for the 11 Special Housing Areas are:

 

  • Belmont, Pukekohe, 720+ homes, 90 hectares
  • Clinker Place and Thom Street, New Lynn, 780+ homes, 13.7 hectares
  • George Terrace, Onehunga, 50+ homes, 2.4 hectares
  • Hingaia, 2500 homes+, 478 hectares
  • Khyber Pass Road, Newmarket, 50+ homes, 0.4 hectares
  • Lake Pupuke Drive, Takapuna, 70+ homes, 0.7 hectares
  • Northern Tāmaki, Tāmaki, 1800+ homes, 204 hectares
  • Royal Road, Massey, 108+ homes, 10.3 hectares
  • Scott Point, Hobsonville, 2592+ homes, 283 hectares
  • Silverdale, 876 homes, 91 hectares
  • Trent Street, Avondale, 29 homes, 0.9 hectares

See maps

 

 

 

 

 

(4) Auckland house consents soar in 2013
By Anne Gibson  Dec 17


There has been a 28pc increase in the number of Auckland housing consents issued in the 12 months to October.
Auckland house and apartment building is at a five-year high, with nearly 5700 dwelling consents issued in the year to October.
Geoff Cooper, Auckland Council chief economist, said this was the highest annual figure since 2008 and a 28 per cent increase over the year to October, 2012.
The 2013 Census showed Auckland had 469,500 households, up from 434,268 in the 2006 Census, he said.

Read the rest here:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11173912

 

 

 

(5) Some Examples of Commercial Sales

For those of you who want higher returns and freedom from stifling controls then consider commercial property.
Commercial  property is quite different for residential investment and can be hugely profitable without the usual glare of publicity that accompanies residential investment.
If you are interested in learning all about commercial property then get in touch with me  through the contact form on the website or by ringing 0800 342 412 or 0274 928 460

Read an example of recent commercial sales by Colliers in the second half of this November:

258-260 Forrest Hill Rd:
Features:
Forrest Hill Mobil service station
Outcome: sold for $3.35 million at a 6.85% yield

Antares Place, unit L: Mairangi Bay
Features:
vacant 149m² office premises
Outcome: sold for $520,000

151 Kitchener Rd Milford
Features:
212m² retail premises
Outcome: sold for $1.06 million at a 5.73% yield

115A Diana Drive  Wairau Valley
Features:
vacant 1227m² warehouse & office on 2450m² site
Outcome: sold for $1.36 million

10-12 Ratanui St  Henderson
Features:
Harvey Norman store
Outcome: sold for $3.893 million at a 7% yield

(Bob Dey)

Complements of the season a happy new year to you all.
Olly Newland
December 2013

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