By Bernard Hickey
The Real Estate Institute of New Zealand (REINZ) has reported property sales and prices bounced in November in a late Spring flush of activity that saw volumes increase, the median price increase and the number of days to sell fall.
“The indications of a lot more listings noted at the beginning of last month have led to a late flush of spring activity,” REINZ spokesman Bryan Thomson.
“With pent-up levels of people now in the market who need to buy or sell homes, we can expect the increased activity to continue through December and the summer without the usual slowdown over Christmas," Thomson said.
REINZ reported the volume of sales in November rose 31.6% in November to 5,138 from 3,903 in October, although it was down 15.2% from 6,056 in November a year ago. It was up from November 2008 when sales hit 4,279.
The median sale price rose 2.9% to NZ$360,000 in November from NZ$350,000 in October and was up from NZ$355,000 in November a year ago. It is just below the NZ$360,500 record high reported for March 2010.
See the full property report tables here.
The median number of days to sell fell to 40 in November from 41 in October, but was above the 33 seen in November a year ago.
“With sellers coming to terms with current market prices and buyers reassured about the long term stability of interest rates, confirmed last week by the Reserve Bank Governor, we can look forward to more positive levels of real estate market activity than we have seen over the past six or eight months,” Thomson said.
The REINZ Monthly Housing Price Index rose 1.9% in November to 3,221.5. It is a stratified measure of house prices as suggested by the Reserve Bank that removes the skewing effect of more houses selling in a certain price bracket in any one month. The index fell in the three months to November by 0.5% and was down 1.9% from a year ago in November.
Housing prices are 4.7 percent below their November 2007 peak.
The stratified measure found Wellington house prices in November were up 0.9% from a year ago, while Christchurch prices were down 4%, Auckland were down 1.2%, Other South Island suburbs were down 2.5%, and other North Island Suburbs were down 3.2%.
The REINZ Monthly Residential Section Price Index fell by 12.1% in the November month, but prices were 2.3% above a year ago.
Economists said the figures showed some rebound, but activity remained weaker than a year ago and the slight bounce was unlikely to change the economic outlook much or the Reserve Bank's likely next increase in the Official Cash Rate in the June quarter of next year.
Here is ASB economist Chris Tennent Brown's view:
Housing activity picked up from October’s extremely weak level during November. The housing market continues to look weaker than this time a year ago, but the pick-up over November provides some comfort that the market is not deteriorating further.
The amount of inventory on the market is still quite high relative to turnover. Months of inventory at the current rate of sales improved from 14 months in October, to 12 months in November. However, this compares to 6 months of inventory during the peak of the housing boom, and the average of 8.7 months of inventory over 2009. Given the level of inventory, and the long average length of time taken to sell property at present, the market continues to remain tipped in favour of buyers.
Accordingly, we continue to expect softness in prices over the months ahead, with prices down around 3% on year-ago levels, and around 5% off the 2007 peak. Implications
In the December Monetary Policy Statement, the RBNZ expressed some surprise at the lack of traction low interest rates have had over recent months. Mortgage rates remain low, but are not stimulating the housing market.
However, the fundamentals for housing do remain unsupportive: migration is low and affordability is still stretched. In addition, while mortgage rates are low, they are significantly higher than early 2009, and are expected to rise slowly over the years ahead. The housing market now enters a quiet period over December and January.
We expect the caution shown by households in recent housing data will continue next year. We expect the RBNZ will remain on hold until June 2011, and rate increases will be very gradual over H2 2011.
Here's JP Morgan economist Helen Kevan's view:
The November results may mark a turnaround in housing market activity, although more evidence is needed before jumping to any such conclusions. Demand for property has weakened considerably since May when new tax measures were introduced preventing property investors from offsetting their losses against income and other taxes. With property now less appealing, house prices headed lower, as did property sales prior today’s rebound.
Property sales jumped to 5,138 in November from 3,903 in October, to be back near the 5,206 sales recorded in May when the tax changes were introduced. The surprisingly sharp jump in house prices and sales in November follows other positive developments in the property space in recent weeks.
First, mortgage approvals recently have picked up, with the value of approvals rising to the highest level since May. Second, new listings were up 7%m/m in November to their highest level three years. And, third, the latest QV house price indicators showed the rate of decline in house prices has slowed, and appeared to be stabilizing.
Given the backlog of unsold property sitting on the market, however, we are not convinced that house prices will avoid trekking lower, particularly given that New Zealanders have become more cautious. Households are realigning their spending patterns and consolidating their balance sheets, which have historically been too leveraged to housing debt, meaning that property investors will not be re-entering the market in droves.
See full regional detail from REINZ release below.
Northland
From $315,000 in October the Northland median price eased back to $310,000 in November, 9 per cent down on the November 2009 median of $341,000.
But the number of Northland residential property sales rose again from 81 in September and 105 in October to 108 last month, but is still down on the 146 sold in November 2009.
In Whangarei County, the median price increased from $312,500 in October to $397,500 last month, just slightly up on the November 2009 median of $391,500. And sales increased from 12 residential properties in October to 18 in November, but still down on the 28 in sold in November 2009.
Sales in Whangarei City slipped back from 57 in October to 51 in November, down on the 63 properties sold in November 2009.
The median price also eased back from $311,667 in October to $290,000 last month also down on the November 2009 median of $325,000.
Auckland
After climbing back to $460,000 in October, the Auckland district median price rose again last month to $477,000, which is $7,000 and just on 1.5 per cent up on the median price in November a year ago.
November’s total sales of 1,789 is up on 1,360 in October and the 1,690 recorded in September but down on the 2,192 sales recorded in November 2009.
The median sale price for a North Shore City home increased again from $531,000 in October to $550,000 last month, but is still down on the median of $560,000 in November 2009. Total sales were 335, up from 272 in October but less than the 428 sold in November 2009.
Sales in Waitakere City increased from 170 in October to 216 last month, but still less than the 281 properties sold in November 2009.
The median price eased back up to $380,000 in November from $375,000 in October, but is still $5,000 below the median in November 2009.
The median price for an Auckland City house increased to $543,500 last month from $483,500 in October and $525,000 in September and is also up on the November 2009 median of $525,000.
At 702, sales were up on the 478 in October but down on the 778 in November 2009.
In Manukau City the median residential property price fell from $462,500 in October to $445,000 last month, also a decrease on the median of $462,500 in November 2009. However the number of sales increased to 295 from 267 in October but was down on the 394 in November 2009.
The Papakura District median price increased from $314,500 in October to $371,250 and is also up on the November 2009 median of $325,000. The 26 sales in Papakura in November was down on the 30 sold in October and 55 in November 2009.
The median price for Metropolitan Auckland homes continued to rise from $455,000, in September and $465,000 in October to $490,000 in November which is also up on the median price of $479,000 in the same month last year. Sales of 1,574 are up on the 1,217 recorded in October but less than the 1,936 in November 2009.
Sales in the Rodney District rose to 129 from 81 in October, but are still down on the 147 sold in November 2009. From $449,000 in October the median price eased up to $451,000 but is down on the November 2009 median of $460,000. The median price for a Franklin District home climbed to $398,500 from $370,000 in October and is up on the median of $375,000 in November 2009. But with 40 houses sold in November, sales were up on October’s total of 27 but down on the 52 sold in November 2009.
In Thames/Coromandel monthly dwelling sales increased from 35 in the previous two months to 46 but were still less than the 57 sold in November 2009. The median price fell back to $325,000 in November from $370,000 in October and is also below the November 2009 median of $365,000.
The median price for an Outer Auckland home stayed steady at $420,000 for a second month but is down on the $423,250 median in November 2009. But sales volume increased from 143 in October to 215 last month (November 2009: 256).
Waikato/Bay of Plenty/Gisborne
At $319,400 for November, the Waikato/Bay of Plenty/Gisborne district median price rose from $305,000 in October but is still slightly below the November 2009 median of $320,000. Altogether 662 houses were sold in the district, up on the 531 in October but less than the 828 sold in November 2009.
In Waikato Country houses sold were up at 92 compared to 70 in October, though less than the 147 sales in November last year. But from $284,000 in October the median price slid back to $282,250 in November, but is still an increase on the November 2009 median of $255,000.
The median price for a Hamilton City house fell back from $330,000 in October to $324,000 last month and is also down on the November 2009 figure of $328,500. Sales volume increased to 165 from 139 residential properties in October, but is down on the 221 sold in November 2009.
In Western Bay of Plenty Country the median price rose from $390,000 in October to $405,000 last month and is up on the median of $377,750 in November last year.
Sales volumes eased up from 47 in October to 50 last month but are still down on the 58 in November last year. The median price for a house in Mt Maunganui/Papamoa slid back from $400,000 in October to $395,000 in November and is also down on the November 2009 median of $407,000. At 75, sales were up on 59 in October but down on the 81 sold in November 2009.
In Tauranga the median price increased to $328,150 in November from $314,000 in October but is still below the November 2009 median value of $355,000. Sales of residential properties increased to 98 compared to 74 in October, but are still down on the November 2009 figure of 114.
Rotorua’s median price recovered from $223,100 in October to $265,000 in November, which is also up on $229,000 median in the same month last year. The sale of 59 properties is up on the 54 sold in October, but down on the 69 in November 2009. In Taupo the median price slipped back from $333,000 in October to $316,000 in November and is also down on the November 2009 median of $346,000.
There were 34 sales in November up on the 27 in October but fewer than the 44 sales in November last year.
At $131,000 the median price for King Country residential properties is a decrease on $164,500 in October and the November 2009 median of $206,500. Sales also decreased from 16 in October to 12 in the last month the same as in November 2009. The median price for a Gisborne City home rose again from $252,000 in October to $263,000 in November, also an increase on the November 2009 median of $256,500. At 39, the number of sales is up on the 20 in October and the 34 in November 2009.
From $286,000 in October the Eastern Bay of Plenty Country median price eased back to $271,000 in November and is down on the November 2009 median of $275,000. There were 38 houses sold compared to 21 in October and 47 sold in November 2009.
Hawkes Bay
In the Hawke’s Bay district the median price fell nearly 2.2 per cent from $287,521 in October to $269,000 last month, which is also down on the November 2009 median of $275,000.
But the total number of houses sold increased from 126 in October to 175 last month but is still below the 225 in November a year ago.
From $316,500 in October, the Napier City median price decreased to $288,500 last month but is up on the median of $284,000 in November 2009.
Sales totalled 68 houses, up on the 52 sold in October, but less than the 93 sold in November 2009. In Hastings City the November median price is $275,000, down on the $285,000 recorded in October and $284,000 a year ago. Sales rose from 53 in October to 73 last month, but were still a decrease on November 2009 sales of 91.
After jumping to $430,000 in October the Hawkes Bay Country median price dropped to $360,000 last month, though this is still an increase on $330,000 in November 2009. There were 10 sales, compared to 8 in October and 15 in November 2009.
Manawatu/Wanganui
Across the Manawatu/Wanganui district the median price slipped slightly to $232,500 in November from $232,950 in October, but is 1 per cent up on the median of $230,000 in the same month last year. Sales at 232 are up on the 156 sold in October but less than the 281 sold in November 2009. At $275,500, the median sale price for residential properties in Palmerston North City is down on October’s $288,750 but up on the $270,000 recorded in November 2009.
Sales of 109 were up on the 84 recorded in October but less than the 118 houses sold in November 2009. The median price in Wanganui City recovered to $189,500 from $168,000 in October, and is also up on the November 2009 median of $184,000. There were 36 residential properties sold in November, up on the 20 sales in October (November 2009: 44).
Taranaki
The Taranaki district median residential property price fell to $265,000 in November from $285,000 in October and is 4.3 per cent down on the $277,000 median in the same month last year. Across the district 145 houses were sold, up on the 112 in October but fewer than the 149 sales in November 2009.
In the Taranaki Country area the median price eased from $197,000 in October to $190,000 last month (November 2009: $202,000). Sales totalled 23, up on 16 in October but down on the 27 sold in November 2009. From $315,000 in October the median sale price for a New Plymouth City residential property fell back to $290,000 in November, and is also down on the median of $338,000 a year ago. At 69 the number of sales was up on the 63 sold in October but down on the 71 sold in November 2009.
Wellington
The Wellington district median residential property price firmed to $400,000 from $390,336 in October and $398,500 in September, and is nearly 2.2 per cent up on the November 2009 median of $391,500. Sales for the month increased to 670 from 496 in October and are also up on the 665 sold in November 2009.
In the Wairarapa, the median price rose to $258,000 in November from $222,500 in October, and is also well up on the $232,000 median in November 2009.
At 55 the number of houses sold is up on the 38 sales in October and the 47 sold in November 2009. The median price for Upper Hutt residential properties recovered to $360,000 in November from $342,500 in October, and is up on the median of $338,400 for the same month in 2009.
Sales of 60 residential properties were recorded last month, up on the 32 sold in October and the 48 in November last year.
The Hutt Valley median fell further last month to $348,750 from $353,500 in October and $376,000 in September but is up on the November 2009 median of $340,000. In November sales totalled 118, up on the 82 sold in October but less than the 133 sales in November 2009.
For a house in Otaki/Paekakariki the median price rose from $329,000 in October to $350,000 in November, also an increase on the $325,000 median in November 2009. The number of sales eased up to 101 in November from 71 in October (November 2009: 127).
From $349,500 in October, the median price in Pukerua Bay/Tawa rose to $395,750 in November, and is also up on the November 2009 median of $386,500. At 76 last month, sales were up on the 68 in October 2010 and the 70 in November 2009.
The Central Wellington median price increased to $522,500 in November from $467,500 in October, but is still down on the November 2009 median of $570,000.
The number of sales at 50 in November is down on the 54 residential properties sold in October but up on the 47 transactions in November 2009.
Nelson/Marlborough
Across the Nelson/Marlborough district the median price eased up from $320,000 in October to $330,000 in November and is up 1.2 percent on the November 2009 median of $326,000. Residential property sales also increased last month to 213 from 151 in October and are up on the 199 sales in November last year.
In Nelson City the median price eased from $345,000 in October to $340,000 in November but is up on the November 2009 median of $320,000. Sales volume increased from 59 in October to 91 in November, but still less than the 100 in November last year.
In Marlborough the median price increased to $300,000 in November from $262,000 in October (November 2009: $310,000). At 77, sales were up on the 51 in October and November last year.
Canterbury/Westland
From $315,000 in October the Canterbury/Westland district median price eased back to $307,000 last month and is nearly 1 per cent below the November 2009 median of $310,000. At 684, sales are up again on the 533 in October, but still below the 832 in November 2009. From $338,000 for the previous two months the median price in Christchurch City fell to $325,000 which is also slightly below the November 2009 median of $327,555.
But the number of sales increased to 439 from just 237 in September and 343 in October though it is still below the November 2009 median of 565. The median price for a home in Rangiora increased to $320,000 in November from $260,000 in October but is still down on the November 2009 median of $330,000.
Sales volume increased to 39 properties from 25 in October (November 2009: 26). From $393,500 in October the median price in North Canterbury plunged to $243,000 last month and is also well below the November 2009 median of $324,250.
From 14 houses sold in October, sales increased to 15 last month, but are down on the November 2009 figure of 26.
After easing from $415,000 in September to $377,500 in October, the median price for a Canterbury Country home increased to $384,000 last month, which is also above the November 2009 median of $370,000. Sales at 46 were up on the 30 properties sold in October and the 40 in November 2009.
The median price of houses sold in Mid-Canterbury further decreased from $248,000 in September and $233,000 in October to $212,500 last month, and is also down on the median of $260,000 in November last year. But the number of transactions increased to 34 from 25 in both September and October, though it is still less than the 46 sales in November 2009.
The median price in Timaru eased back to $207,500 in November from $235,000 in October, and is below the median of $220,000 in November 2009. At 42, sales were up on the 37 properties sold in October but down on the 54 sold in November last year.
The median price for a house on the West Coast increased last month to $201,000 from $190,000 in October, but is down on the November 2009 median of $227,750. Sales increased back to 36 from the 33 residential properties sold in October (November 2009: 28).
Central Otago Lakes
Across the Central Otago Lakes district the median price recovered to $421,000 in November from $385,000 in October, but is still 4.5 per cent down on the median value of $441,000 a year ago. Sales at 75 residential property transactions in November are also up on the 63 in October but less than the 99 in November last year.
After falling to $477,500 in October the Queenstown median price eased up to $480,000 last month, but is still significantly down on the November 2009 median of $560,000.
Sales were also up at 40 properties compared with 32 in October (November 2009: 46).
Otago
From $245,000 in October the Otago district median price fell back to $230,000 in November the same as September, and is nearly 4.2 per cent down on the November 2009 median of $240,000. Across the region 260 dwellings sold last month, up on the 180 sales in October but down on the 275 in November 2009.
The median price in Dunedin City eased back from $259,500 in October to $236,000 in November, a decrease on the November 2009 median of $256,752. At 204, sales were up on the October total of 150 but down on the November 2009 figure of 210.
Southland
In Southland the median price increased from $169,500 in October to $189,000 last month and was also 3.8 per cent up on the November 2009 median of $182,000. Sales volume also increased from 90 in October to 125 last month, but is down on 165 properties sold in November 2009. In Invercargill the median price rose from $169,500 in October to $195,000 in November which is the same as the median in the same month last year.
At 84, sales were more than the 68 sold in October but less than the 118 in November 2009. The median price for a house in Gore increased to $165,000 in November from $121,000 in October and is up on the median of $138,500 in November a year ago. Total sales also rose to 16 in November from 13 the previous month (November 2009: 27).
(Updated with extra regional detail, background, stratified measures, REINZ quotes, ASB reaction, JP Morgan reaction, interactive chart)
Volumes sold - REINZ
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75 Comments
Man you guys are neggy. I think the market is coming back because the banks are starting to lend at 80-85% again, especially to foreigners. Shows how much of an effect bank policy has on the property market with such a high level of personal debt in NZ.
I reckon we're in for a brief surge with a few pent up buyers, and then after summer things will settle down a bit but still be better than they were though 2010 - as long as the banks dont further adjust their lending rules.
“With pent-up levels of people now in the market who need to buy or sell homes, we can expect the increased activity to continue through December and the summer without the usual slowdown over Christmas," Thomson said.
Talk about setting yourself up for a fall.....credibility is so important.........
regards
According to the above Auckland City house price increased over 10% in the month. This is clear evidence that the Auckland house market is finally crashing as a 10% increase means that only expensive houses must be selling because that is the only way prices could be increasing when we just know they are decreasing.
What's more if you add in inflation then compare this 10% increase to the amount of money you would have made if you had been the person that bought that $5 painting that sold for $50,000 then your central Auckland house investment suddenly looks shocking - in fact that 10% increase is more like a 9000% DECREASE in house value.
What's maths got to do with it?
It's all the fault of property investors. They are no doubt buying up the expensive houses that are being sold under duress, therefore inflating property prices even further by competing with first home buyers who would otherwise be buying the $2M plus houses. The only solution is more tax. The more property can be taxed the more expensive it is and eventually it gets so expensive no one can afford it and it gets cheap. The fact that the population is increasing faster than houses are being built is irrelevant, housing is the only thing not subject to supply/demand.
I have learned a lot from this website.
ROFPML. And don't forget the "Magic Median Multiple" Bob. Once upon a time the median house price was 3 times the average income. Apparently this is a sacred number that everything must revert to.
Actually I think the real problem for the global economy is going to be when all computer memories revert back to the historical 20 year average of 64k. This current bubble that has seen average memories soar to (clearly unsustainable) 2gigs is obviously about to burst.
I don't think you can apply Moore's Law to property. Furthermore, scientists have placed limits on exponential growth in semiconductor capabilities. I have never seen that applied in a general theorem to property investing. We just get the silly biblical reference like the 7-year theory.
On 13 April 2005, Gordon Moore stated in an interview that the law cannot be sustained indefinitely: "It can't continue forever. The nature of exponentials is that you push them out and eventually disaster happens."
However, the property industry is more aligned with those who are less credible in stating limits and understanding risk--think bankers, central bankers, politicians, the white shoe wide-boys, and the rank-and-file.
Lighten up J.C. Every time I look at you I can't understand, why you let the things you did get so out of hand. You'd have managed better if you had a plan: why'd you pick such a backward time in such a strange land. (If you'd come today you could have saved the nation......etc
"The fact that the population is increasing faster than houses are being built is irrelevant..."
Completely irrelevant, not to mention incorrect.
But it's good to see a whole lot of desperate enabling going on between the last of the PIs and RE hacks left at this website!
Um so its up about 1% from last year. That doesn't sound "significant" to me at all - its more "margin of error" stuff from a statistical point of view. You would be hard pressed to call this a new uptrend. Sure there is some market activity and thats exciting for agents as they will be getting some Christmas commissions but surely people can't be expecting much in the way of capital gains over the next few years and my point of view is that there is far more downside risk as the mean reversion plays out. I'll be buying in about 4 years time.
"...buyers reassured about the long term stability of interest rates, confirmed last week by the Reserve Bank Governor"
Well I never.....fancy that...Bollard is setting the long term interest rate level...how's he do that...to have such control over the international bond market....Bernanke must be staggered....way to go Bolly....
Of course we are different and the normal market rules do not apply...unlike across the ditch where even the RBA has told the stupid media the reserve bank rate has very little influence over the rates at the trading banks....
Whether the fundamentals bring the market down to Earth this year or the next, it will happen eventually, because it has to happen.
Reinflating the bubble makes no sense at any time, but is patently absurd during the worst NZ and global economic crisis since the Great Depression.
The financial strength required to keep house prices in the stratosphere simply doesn't exist.
ho hum...cut'n'paste time from this time last year...what is it about kiwis that they want to pay more for a house than it's actually worth in global relativity...maybe we're like eels and have to swim all the way to the sargasso sea and return each year just to spawn?
I was reading yesterday the median house price in the US is US$175,000 and here its NZ$360,000 (which is roughly US$ 250,000)
Our house prices are on average way higher than the biggest economy on the planet .
Its all a bit odd given our incomes are lower and and taxes are higher .
Boatman,
There are two crucial differences between US and NZ house prices. No 1. Auckland has ring fenced the urban boundary for decades. Outside that line lie Lifestyle Blocks and Farms that can't be subdivided. In the US no such line exists in most metro areas-save Portland, Oregon, and guess what House Prices are astronomical there compared to other non coastal metro areas.100 Ha farms are eaten up by developers and converted into 800 houses as needed (or during period of '05 to '08 whether needed or not). Then motorways are extended to serve the new exurban areas. In Minneapolis/St. Paul 16th largest metro area the annual highway constuction budget is US$250 million. So land is cheap and people move there because the Govt has great borrowing capacity to build highways. That's the advantage of having the World's Reserve Bank than can print up 600 billion and the foreign exchange rate barely moves.
Second reason Median House Prices are so low is building material costs. A Kiwi builder visiting a Home Depot in the US would feel he died and went to heaven, eg: Paint $30 for 4 ltrs, 100x50 framing timber @$ .50 per mtr, and Plastic Plumbing that runs at about 1/8 of the cost that Marley (the monoply supplier) charges. And freight in the US is cheap as chips, and lastly there GST taxes run on average at 6%.
The good news is all real estate is local-so unlike our manufactueres we don't have to compete with the US or China when selling our houses.
Brian Thomson says - “With sellers coming to terms with current market prices and buyers reassured about the long term stability of interest rates"
Most mortgages are for 25 years. Is Mr. Thomson predicting that NZ floating mortgage rates will stay at the current low rates for all of this time? Caveat Emptor!
You can't compare the US median house price vs NZ.. You should pick a STATE in the US where it has similar population and econony to NZ and then compare the medan house price.
After all have you been to some of the poorer states or cities in the US? I can't think of any place in NZ where it's more depressing and poor than some cities in the US..
Once again we see the usual PI blather.
Back when the property bubble was going great guns, the refrain from PIs was always "Where the USA goes, we follow!", but once the USA's bubble burst the PIs declared "It can't happen here, we're different!"...And they are still telling themselves that.
Updated with JP Morgan, ASB reaction, regional detail, interactive chart, House Price Index view.
Big drop in section prices... Wonder what's up there.
Something is brewing though.
I wonder if the tax cuts have just gone straight into property prices.
Your view?
cheers
Bernard
can't see the tax cuts going into anything but paying down debt..they were so miniscule that most people would be hard pushed to even notice them let alone go "whoopee..let's go out and buy a house?".....according to research conducted by Massey..."all horses get skittish before a storm but only fools and horses go out and buy a house before the said storm!"
So there you have it Mr Chickey...straight from the horses mouth!
I actually agree with Rob of Hibiscus Coast
Most people have been deleveraging in 2010. Like I have said before there is heaps of money sitting on the sidelines not happy getting 5% term deposits (que for Wolly and Nic A to tell me about the latest fantastic TSB rate etc)...didnt ASB just start cutting their rates.
The market is settling, rates are low, Bollard aint moving for 6 months plus so a few baby boomers are out on the prowl getting a rental, or some peole going up the ladder
Regards
Here's the thing, 28 y.o. It's not just that people are de-leverageing. They are also...leveraging! Now, and the near futures, is not the time to apply that financial horsepower. Not until the bought of deflation has passed through. It will. And the 'heaps' of money on the sidelines will be applied to whatever the new dynamic is. Property has had it's day. Something new will become de riguer. It always does!
Go on Nic
buy a rental in Auckland, I know you want to, prices in Auckland won't be crashing and rents are good.
I assume though that you are a bit older than me and already made your money in property and looking for a low risk place to park your $$ before pension comes a knocking ;)
Regards
Interesting to see people's perspectives on this- those who predict a slump say here's the dead cat bounce, those who see prices just easing say there is no slump that is obvious.
Obviously nobody is out of the woods yet, but we may find that house prices (not apartments, vacant sections or beach houses) in NZ will be more resilient than some expect, unless a government makes major changes to taxation law. In meanwhile, I'm detecting no weakness in the rental market, have just renewed contracts for 3 properties with no increase for one and $10 and $15 per week increase for the others.
What are others seeing?
agree.. my older brother bought a house in Ponsonby two years ago for 800K, they meant to return to NZ this year but his work extended for another 18 months in Singapore - they rented the house here for $1100/wk - tenant moved out in November and they had 14 groups expressed their interest in 1 open home. They rented again for $1150 in the same week.
So the renter has to pays about $85,000 of gross income to service the rent. That's at about the same rate as servicing the interest on a mortgage. So both are the same 'dead money'. Why then, would a renter pay that amount to rent, rather than buy? One reason, perhaps, is that the renter sees the purchase price falling from here, so is prepared for 'zero cost' accomodation leading to an ultimate lower cost of ownership? Or perhaps the renter just plain can't afford the purchase price of similar accommodation? Who knows, but no reason to rent at that price calculation is an indication that prices are about to rise....
Fair comment but in this case they borrowed money from Singapore at 1.3% interest rate for 10 years term - taking the FX variation into account - they are still making a killing!
But then they could buy a property in Singapore at the same time and would make at least 30-40% gain by now!
Understood. My landlord is Singaporean as well ~ but he's in at 3.5%. Still a good carry. But unless we get follow-through foreign buying at artificially low % rates ( the Chinese interest, for instance, where I am has evapourated! In fact, they are sellers here..) it's only relevant to domestic demand. Oh, and it only take the kiwi to get belted ( quite proabable with the new debt fugures!) and those with offshore funding will be staring at quite an FX loss on paper.
(NB: My wife just read my comment and said " I'll get it's a 'group' that rented at that price, not an individual. That's ,say. 3 , 20 y.o's renting in Ponsonby. Keep any eye on your brother's property, in that case!)
So I assume they borrowed in yen and their mortgage comes with a switching facility. Those loans put all the exchange rate risk on the borrower (plus the cost of exchanging at the bank rate) and are subject to margin calls that were widespread during the GFC and will happen again in the future. Many a flush expat has been undone by these loans and many of the punters don't fully understand how they work against you.
Maybe all the punters are starting to settle into the "new normal" which seems to change by the day...but they're certainly zipping their wallets! http://www.sharechat.co.nz/article/df449322/retail-sales-fall-in-october.html
CM. You and SK sum up the market. Tenants are staying put. That's less coming back onto the rental market, but also less tennats looking. Why would anyone want to buy when the market is going to fall! It's much cheaper to pay 5% extra rent for a year than lose 5% on the purchase price of your own home. That's why the renters...are staying..renters. It's yet another piece in the jigsaw puzzle of falling house prices.
My figures were based roundly on an interest-only mortgage. So after 25 years odd, all you've paid is interest to the bank ( the same as rent to your landlord, in effect) and you still have an outstanding loan amount. What the discharge figure on that loan amount is, relative to the market prices at the time ,is the only unknown. If we do go "Japanese' then the prices of property in 25 years will be much lower than today, yet the principal of the loan will be unchanged ( and based on the inflated property prices of 25 years ago)
Exactly, CM ! Which is what I mentioned to OllyN all those months ago. Renting density will rise. We won't have 2.55 people per houshold any longer. You brother's house has probably gone from that to...5. That's tens of thousnads of houses in this country that we have in over-supply. A fact that, as your illustration shows, will also affect Auckland.
"Housing starts plunged by 13.2 per cent in the September quarter ( in Aussie), far outpacing the five per cent decline tipped by economists."
I'm glad you place so much trust in the Westpac economists measure, SK ! It's a bit like asking the poacher how many pheasants there are in the woods.
Monetary, perhaps you mean?
Tennants are staying put yes, they could move but will be up for a higher rent down the road anyway - so why move?
More upward pressure on rents is coming when all the grads and people who couldnt get a job in the last few years - do find employment and move out of mum and dads place finally.
Nicholas,
You have a point, although one lot of tenants are a Korean family who have 2 boys here as international students, mum also at an English language institute and dad comes and goes Korea/NZ- plays a lot of golf too. In their 3rd year here now. So they are not going to buy.One of the other tenants are a family ( both work, good jobs, one child) who have been 6 years now and never wanted to buy even back in 2004. Not everyone wants to be property owners, I believe in Germany you have those who own quite a lot and over 50% of the population rent, so obviously a mindset thing.
Good to see this report fresh in from the NZ Property Investors and Landlords Assoc...read on:
Blog: The Landlord says... « 5 reasons why the real estate market can’t stay down Finally a bounce
Well it finally happened. There has been a spring bounce in house prices according toREINZ figures out today.
We often talk about the housing market picking up in spring and until now it has failed to materialise. Looking at the numbers there has been some lift which will no doubt have many of the doomsayers scratching their head.
It isn’t that surprising to see this lift as for a couple of weeks now contacts in the real estate industry have been reporting that there have been increased levels of activity in the market.
Perhaps what has been the most surprising is that the low interest rates haven’t spurred on much activity in the housing market – something Reserve Bank governor Alan Bollard noted last week in the Monetary Policy Statement.
The good news, for investors, out of that statement was that he has now indicated that the official cash rate will be kept low for longer than previously expected.
You’d think this would be seen as a positive sign for the market. However, we put out our quarterly property investment survey today and early submissions flag interest rates as one of the issues for next year. At least it shows investors are thinking about what is happening out there.
Coming back to the latest stats one has to be careful about extrapolating them as it is, after all, only one month. There are still plenty of positive and negative factors battling each other and this could just be a blip, or as some say a dead cat bounce.
Immigration and interest rates are positives; however affordability and a still weak economy are negatives.
The next two months are unlikely to give much more of an indication on where things are heading as they are traditionally pretty dormant. However we did get the spring bounce in summer so who knows.
No spring bounce down here in Dunedin - prices down 9% on last month. Even if you smooth out extreme fluctuations like that, there's been a slow but steady deflation of the market since 2005 in these parts. Low long-term sovereign yields were the last vestige of support for the international property bubble...oops, that party's over now, too.
Rob, reading your comment, it seems a very balanced and thoughful one, rather than attention -grabbing pronoucements one comes to expect. I agree there are a mixture of negative and positive factors at play. One can be rather optimistic if just chery pick the positives, and pessimistic if cherry pick the negatives. The reality is half way beween the outlooks of Olly and Wolly.
The RWC for NZ has all the capacity to be to the country what the V8 Supercars Race has been to Hamilton.
http://nz.news.yahoo.com/a/-/top-stories/8505744/hamilton-mayor-horrified-by-cost-of-v8-event/
Bah... lets look at the incentives here..
The members of the REINZ only get paid commissions, which means houses bought and sold. Fewer houses bought and sold means less commisons to their members, and lower prices also mean less commissions to their members. Agents get no other income and often have a fair chunk of their commissions taken by the firm they are working for in order to pay for the desk/marketing/brand/admin support etc etc...
So it seems only logical that the REINZ would predict better times during the summer because that is the sort of news that its members want to hear - the good times are coming back...
Remember that these are the people that describe as 'lovely sea view' as being something that can only be seen by standing on top of a 10ft ladder on top of the highest point on the roof...
Absolute, blatant nonsense
with depreciation gone I can't believe so many people are so excited about property as an investment. even with low interest rates and the inability to off set income with the abolition of the laqc framework. this effectively means we have a capital gains tax in disguise. The return on your investment is stuff all, and presumably there will be a lot more provisional taxpayers coming on stream in the near future. That’s the masterstroke of JK - who cares about the $12b cash deficit now. Next year the dumb PIs will be filling the coffers, and pleading poverty as their property portfolio disappears down the proverbial. suckers!
Kane, the only ones excited by property as an investment now are those who are already in a powerful position in the industry. And they are excited by the increasing returns received from the investments made sometimes generations ago. Interest from wannabe PI's has practically disapeared. Everwhere and everywhen authorities have tried intervention to curb the power of long established property owners they have enhanced it.
Do away with depreciation, pffft. Stomp on LAQCs, double pfft. The properati will be lobbying for immediate introduction of capital gains tax on sales made within, say, five or ten years of purchase. Because they know there's one rule that counts: you don't sell houses, you buy them. The time will come that when you attend an auction, the crowd of the great unwashed won't be bidding to buy the house, but to buy the lease on the house. Very few here will believe such a thing is possible. That's one of the main reasons it's going to happen.
This is an interesting article, from the Sydney Morning Herald I think.
http://www.stuff.co.nz/business/money/4452643/Confession-I-don-t-want-to-own-a-home
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