market report - residential

The Western Bay of Plenty residential property market was relatively steady in 2011 with some improvement in sales volumes later in the year.  At this stage we would expect similar steady activity levels in 2012.

The availability of credit remains an issue and deleveraging remains at the forefront of the minds of many.  Interestingly we note some lenders are now accepting smaller deposits for home loans than 12 months ago.  Home owners appear unwilling to change houses as this normally involves taking on more debt. 

We have recently encountered reluctance on the part of banks to lend on Monolithic clad homes until they are satisfied in their condition and in one example we found a refusal to lend.  If this is a new policy it is likely to a have a significant effect on the selling (and consequently values) of these homes.

According to QV residential property indices values in Auckland are 3.4% above the same time last year, Wellington is -0.4%, Christchurch figures have been distorted by the recent earthquakes but are up 3.6%, Dunedin is -0.2% and Tauranga values are 0.4%. 

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 especially with the changes in depreciation and LAQC rules.  We are however starting to see some upwards pressure on rents with some suburbs having a shortage of rental accommodation.

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, however job opportunities are attracting large numbers of applicants.

The Reserve Bank decreased the Official Cash Rate from 3.0% to 2.5% in the wake of the second Christchurch earthquake in an effort to offset its impact on the struggling New Zealand economy.  This has seen a reduction in the floating interest rates of 0.5% from most of the major trading banks.  It is anticipated that once the reconstruction work is well underway and contributing to economic activity that the Reserve Bank will look to increase the OCR. 

The apartment market in Mount Maunganui continues to be oversupplied and sales remain patchy in this category.  The last substantial complexes to be completed at Mount Maunganui were the “Pacific” and “Eleven” which were finished in 2009.  There are still a number of apartments available for sale in both of these complexes.

There has been a significant correction in prices for sections and more are selling as a result.  The announcement that ‘The Lakes’ subdivision had gone into receivership had a negative impact on confidence and further highlights the over supply of sections in the Tauranga market.