market report - residential

The Western Bay of Plenty residential property market continues to operate in a subdued fashion.  Sales activity has been patchy and evidence suggests the market is relatively quiet at present with buyers remaining cautious.

The availability of credit remains difficult and expensive which means that deleveraging remains dominant.  Home owners appear unwilling to change houses as this normally involves taking on more debt.  Also there is a feeling that people are taking a “wait and see” approach until the full repercussions of the Budget are understood.

Clearly the market has shown improvement on 2009 and there has been pressure on pricing in the lower bracket but it is unclear whether this will continue in the short term. 

According to QV residential property indices there has been growth in values in 2009 in the major cities with Auckland values rising 5.1%, Wellington and Christchurch 4.6% and Dunedin 4.9%.  Tauranga however only rose 0.1% in 2009 with most pressure on prices being in the lower bracket given increased demand from first home buyers.  This increase is more or less in line with our research with anecdotal evidence suggesting values are fairly static at present.

We are yet to see investors returning to the market with returns remaining poor and little prospect of significant capital gain.  Values will either have to decline further or rents increase in order to entice investors back. 

Consumer confidence has also rebounded with recent surveys indicating an improvement from those levels recorded in 2008 and early 2009.  We consider job security is still a very important factor in the timing of a recovery in the market and we are now hearing of employers seeking more staff as the country comes out of recession.

The Reserve Bank has increased the Official Cash Rate from a record low of 2.5% up to 2.75% and it is expected that there will be further increases as the economy continues to recover.

The apartment market in Mount Maunganui continues to be oversupplied and sales are patchy in this category.  The “Pacific” and “Eleven” complexes have recently been completed with media reports suggesting approximately 50% being sold in “Eleven”.  There has been a significant correction in prices for sections and more are selling as a result.  This combined with low interest rates and strong migration has seen an increase in new houses being built.

Overall, the residential property market has made a recovery in terms of sales volumes.  There is certainly a higher level of activity in the lower to medium brackets and some improvement in activity in the higher price bracket which has taken longer to recover.