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Thursday, 22 July, 2010 |
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By Graham Skellern - Bay of Plenty Times, 15/7/10
The residential property market in Tauranga remains stagnant - as the latest sales figures near the depths of the recession two years ago.
Even though an economic recovery is slowly taking place in New Zealand, the housing market in the city refuses to fire up - as people concentrate more on re-establishing their financial positions rather than taking new steps.
The latest Real Estate Institute of New Zealand (REINZ) figures reveal that only 81 houses sold in Tauranga (excluding Mount Maunganui and Papamoa) last month - nearly half the number of sales 12 months earlier and almost matching the low of 75 in June 2008.
On the coastal strip, there were 54 sales in June, compared with 71 in the same month last year and 46 in June two years ago.
The median selling price is also being hit, as the bulk of the sales activity takes place in the low-price bracket of $350,000 and under - fuelled by the low-deposit Housing New Zealand loans.
In the Mount and Papamoa, the median fell from $390,000 in May to $375,150 last month, and across the harbour it slipped well under the national average to $330,000, from $340,000 in May.
Bucking the Tauranga trend, the national median moved to a high of $352,500 last month - 3.67 per cent higher than the $340,000 in June last year and standing out against the previous peak of $347,500 in June 2007.
In the Bay, sales volumes had reverted back to the lows of 2008, said Harcourts Advantage Realty managing director Simon Martin.
He said sales for the year to May had totalled 476 in Tauranga, compared with 437 in the same five-month period two years ago.
The peak of the local market was nearly 3000 sales in a year in 2003 and it plunged to just over 1000 in 2008.
Mr Martin said good inquiries had been occurring in the past three weeks and attractive new properties were being listed.
"We've got 50 auctions coming up, actually, and there has to be a lift in activity.
"Only 80 people bought houses last month. Either a lot of buyers missed out or they haven't done anything yet."
REINZ national president Peter McDonald said the national median of days to sell had increased from 43 to 45 in June, and it was now over 60 days in Waikato/Bay of Plenty, Hawke's Bay, Manawatu/Wanganui and Taranaki.
Central Otago Lakes, including Queenstown, had the longest median, at 86 days.
The days to sell in Waikato/Bay of Plenty was 63 days, up from 55 in May and 57 in June 2008. The lowest was 29 days in June 2005 and 34 days a year earlier.
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Thursday, 22 July, 2010 |
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By Bernard Hickey, Herald On Sunday - 18 July 2010
In years to come New Zealanders will look back on the winter of 2010 as the moment we finally realised the last decade of growth was a sham.
It will be the moment when it dawns on home owners, small business people, retailers and real estate agents that our household debt has hit saturation point and we just can't swallow any more.
It will be when we realise that without that extra debt our economy doesn't grow much, unless we can produce more useful goods and services for each hour that we work.
Our productivity hasn't grown much in the past decade and now we can't disguise it any more by spending borrowed foreign money.
The giant Ponzi scheme of adding more debt to buy more houses (or spend more on the same houses) then relying on capital gains to make up for it only works as long as some sucker is jumping in at the bottom with yet more debt.
It is now clear that New Zealand has been in a twilight zone since the onset of the global financial crisis two years ago, wondering why everything seemed the same.
Unemployment didn't rise much, house prices dipped and then bounced, and GDP seemed to return mid last year.
But this winter we discovered that the tide was going out, and in the past six weeks we have collectively discovered that the economy is naked without the extra debt.
Here's the latest:
* Mortgage approvals hit a record non-holiday period low last week of 4867, or $601 million. Annual household debt growth has slumped to 2.5 per cent from over 10 per cent two years ago.
* The housing market went deathly quiet in May and June, latest Real Estate Institute figures show. Turnover has dropped about 20 per cent from a year ago. It's not just a winter thing.
* Retail sales in May were again frustratingly weak. Core retail sales fell for the fourth month in six months and supermarket sales fell in May for the first time ever.
* BNZ's confidence survey shows a sharp decline among small business owners in particular as the real estate market goes into the doldrums.
Many small business owners fund themselves from mortgages on their houses and when the values of those properties stop rising it's hard to raise extra finance.
One banker said of the market: "A few loan applications, but 80 per cent rejection generally due to risk too high. Generally small business wanting to borrow have left it too late, with balance sheets in poor state."
Banks are being more cautious as their funding becomes more expensive. Borrowers are more cautious because house prices have stopped rising and they realise interest rates are rising.
The coup de grace was the Reserve Bank's decision on June 10 to put up the OCR.
The tide has gone out and our housing-dominated economy has been caught swimming in the buff. It needs to put on some togs in the form of a vibrant export industry and a productive sector. This will be a long, hard grind without the help of extra debt.
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Wednesday, 7 July, 2010 |
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By Brian Fallow - Weekend Herald, 3 July 2010
Westpac economists expect house prices to fall about 2 per cent this year and another 2 per cent next year as a result of tax changes, rising interest rates and falling population growth.
Westpac economist Dominick Stephens said in real terms house prices had fallen 12 per cent from their peak in late 2007 and on today's fundamentals were only slightly overvalued.
But the tax changes due to take effect on October 1 would reduce the fundamental value of houses, creating a renewed reason to expect continued price weakness.
Much the most important change is the lowering of the top personal income tax rate from 39 to 33 per cent.
The tax laws allow landlords to use cash losses on property investments to offset other sources of taxable income, while capital gains are usually untaxed. Lowering tax rates reduces the value of that tax shelter.
Owner-occupiers also avoid tax in the sense that any other investment would incur income tax on the flow of benefits. "The tax cut will improve the return on alternative investments relative to buying a bigger or better house," Stephens said.
In comparison the removal of a depreciation allowance on buildings is much less significant.
It would seriously hurt the cash flow of a few highly leveraged property investors, Stephens said, but because landlords have to pay back depreciation claims upon sale (unless the property actually does fall in value) for most of them the tax change only meant the loss of an interest-free loan.
Westpac estimates house price inflation will be about 10 per cent less over the next few years than it would have been without the tax changes.
This rests on its view that property investors are the marginal buyers, who set the floor price for houses, particularly towards the market's lower end.
But not all of the adjustment will come through lower prices. "Our calculations suggest rents will end up about 7 per cent higher than they would have been had the tax system remained unchanged," Stephens said.
"But it will take years for these changes to work through the market."
The Treasury's estimates of the impact on house prices and on rents are lower. That is because it believes rental property demand is more elastic than Westpac does: that more young people, for example, will just stay at home if rents rise too fast.
But Stephens said that as the economic recovery strengthened, better job prospects should encourage more young people to fly the coop and enter the rental market.
Another effect of the tax changes is expected to be a widening of the gap between low- and high-end properties.
Landlords, more sensitive to tax, are more active towards the lower end of the market, while the potential buyers of upmarket properties get the biggest tax cuts.
Stephens expects the decade ahead to look more like the 1990s, when tax changes were unfavourable to landlords and favourable to those on high incomes, in contrast to the 2000s when the introduction of the 39 per cent top tax rate both hit those on higher pay and increased the incentive to buy rental properties.
The recovery in the housing market last year may have been partly caused by buyers rushing in while mortgage rates were low, Stephens said. "Now that floating rates are on a rising trend, buyers seem more reluctant."
Westpac expects floating mortgage rates to rise steadily, to a "new normal" level higher than that of the 2000s.
Global interest rates are expected to be higher, pushing up banks' funding costs, and higher average mortgage rates are tipped to reduce demand.
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Monday, 11 January, 2010 |
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Featured in Yahoo Extra Business News - 11/1/2010
Nationwide house values ended 2009 just 4.9 percent below the late-2007 peak, having been as much as 9.6 percent below the peak last April, QV's residential index for December shows.
While the recovery was led by the urban centres, QV (Quotable Value) is now seeing signs of confidence returning to provincial markets.
For the whole of 2009, New Zealand house values rose 2.8 percent, with an average sales price of $404,671 in December, up from $393,373 in November, when prices were 5.9 percent below the peak.
The year had shown a dramatic and somewhat unexpected level of turnaround in house values, QV said in publishing the December figures today.
After reaching their peak in late 2007, house values dropped steadily throughout 2008.
At the beginning of 2009 two camps developed -- those that considered the market had much further to fall, and those that considered it was near the bottom, and perhaps heading toward a good time to buy.
The property market was strongly influenced by consumer confidence, and as consumer confidence began to grow in 2009, so did property values in the main centres, QV valuation manager Glenda Whitehead said.
Driven by the main centres, nationwide values rose 5.1 percent between the market bottom in April and the end of the year. For the main urban areas the rise since April was 6.5 percent, taking values in those areas to just 3.9 percent below their peak.
Values in the Auckland area rose 5.1 percent during 2009, the Wellington area and Christchurch both rose 4.6 percent, and Dunedin rose 4.9 percent. Hamilton grew only 1.8 percent and Tauranga ended the year with an increase of 0.1 percent.
Provincial centres saw a less pronounced rise in house values during 2009, increasing 3.2 percent from the low early in 2009 to now be 7.7 percent below their peak, Ms Whitehead said.
The value of houses in rural areas remained relatively static for most of the year, but a rally late in the year led to values increasing 1.3 percent since early 2009 to now be 6.5 percent below the market peak.
Price changes varied considerably in provincial centres over 2009, with Whangarei ending the year down 5.2 percent and Gisborne down 5.6, while Rotorua was largely unchanged with a 0.4 percent gain, and New Plymouth lifted 7.1 percent.
Reports indicated residential property listings had been more abundant in provincial and rural areas, with demand lower due to localised economic factors such as closures of local industries and subdued earnings for the rural sector dampening confidence, Ms Whitehead said.
"There are now signs of confidence returning to the provincial markets, with activity in more recent months showing value increases."
For 2010, QV expected sales activity would lift in the first few months as owners who held off in 2009 decided to move.
"If the increase in values in the main centres is being driven by a lack of properties for sale, therefore an increase in sellers tempted to the market by the improved prices should see a levelling off in values," Ms Whitehead said.
"However, there still remains debate about whether the current listing shortage is actually driving up values or rather there is actually an underlying shortage of houses in the main centres -- that debate will no doubt continue."
A cautionary tone still prevailed in the market. Given the wider economic conditions, QV expected values to rise slightly throughout 2010, but not at the same rate as in recent months, she said.
"If the rebound in values were to continue at the present rate we will all too quickly regain ground lost since the peak in 2007, when the market was considered overpriced and highly unaffordable."
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