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Monday, 22 December, 2008 |
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By Martin Hawes “Building Wealth” – Herald on Sunday
Debate is raging about the future of property prices. It is a debate that is being held online and in the pages of newspapers (including this one) and other media.
On one side is a group of people led by my fellow columnist Bernard Hickey, who says that property values still have a long way to fall (to as much as 30 per cent below last year’s property peak).
On the other side are largely those in the industry with vested interests, who claim that confidence is returning and that the worst is over.
Which side is right? In my view the risk for property is all on the downside.
I would find it hard to say emphatically that property will fall by 30 per cent in value across the board; however, I do not think that values have yet finished falling.
In spite of what some might say, I do not think the slump is over.
In many respects the question “Will property fall by 30 per cent?” is the wrong one. A better question is “Is this a good time to buy?” My answer remains the same as it has been all year: a resounding “No – not yet!”
Yes, I know that interest rates are falling and affordability is coming back into line. However, for my money, property yields are still too low – when you look at values and rents, the numbers still do not add up.
And next year will not be good economically – unemployment will rise and people will feel less secure about their jobs and incomes.
Banks are also reverting to the normal requirement of a much more substantial deposit from home buyers – lower interest rates are of no interest to those who cannot come up with the deposit.
I cannot see any substantial lift in property values for some time (probably years), so this is not yet the right time to buy property.
I like property as an investment, but at present I advise my clients to wait for the market to fall further and for things to settle before buying.
I am encouraging clients to get their affairs in order with strong finances and good plans so that when the market does turn, as it inevitably will, they are ready to profit from it.
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Monday, 15 December, 2008 |
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Auction room is overflowing
By Graham Skellern – Bay of Plenty Times
Well located commercial and industrial buildings continue to be flavour of the month for investors, with nearly $10 million worth of property sold in the Tauranga auction rooms this week.
Bayleys moved four properties for $5.279 million, including the Design Mobel factory and head office in Maleme Street, and a day later Colliers International sold three buildings worth $4.355 million at their auction.
Bayleys spokesperson Gil Beadle said the auction room was packed and people were spread down the stairs. The bidding was like two years ago, he said.
“One swallow doesn’t make a summer. But it was reassuring. People who have $200,000 and the ability to borrow are out there looking for investments,” said Mr Beadle.
The 1.25 ha Design Mobel site, with 4606 sqm of workshop and warehouse and 420 sqm first-floor office, was sold to a local investor for $3.3 million – producing a yield of 10.6 per cent on the investment based on a present net annual rent of $350,000.
The next two-yearly rental review is due next June and the property’s 12-year lease runs until September 2013, with a right of renewal for a further eight years.
Slat bed and furniture maker Design Mobel, founded by Dave Macfarlane, was bought by Sleepyhead earlier this year and a new company Opco, owned by Mr Macfarlane and private equity fund manager AMP Capital Investments, took over the lease of the Maleme Street property.
Design Mobel is still trading under its same name and has a four-year contract to supply flexible slat beds and bedroom furniture to Sleepyhead.
Opco is looking at expanding the factory production in to other furniture, such as wardrobe systems.
Bayleys also sold a 466 sqm warehouse and office building on an 820 sqm site in York Avenue, Mount Maunganui, to a Rotorua investor for $504,000 – yield 8 per cent. The building is tenanted for $40,375 a year by engineering company, L A Iron, which services the cold storage industry.
A neighbouring 411 sqm warehouse in Triton Avenue on a 812 sqm site went under the hammer for $475,000 – yield of 7.4 per cent. The building, attracting $35,000 rent, is used for storage of plant and equipment for the adjoining cold store blast freezing facility operated by Cold Storage Tauranga.
A refurbished building in Durham Street comprising two tenancies sold after auction for $1million.
Colliers sold two bank buildings at Fashion Island Shopping Centre in Gravatt Road, Papamoa.
One of the buildings housing the ASB Bank branch on a six-year lease sold for $1.785m – yield of 6.27 per cent, and the other National Bank fetched $1.4m, with a yield of 5.43 per cent.
A Cameron Road property, home of Dive HQ Tauranga for 30 years, was also sold for $1.75m for a yield of 6.15 per cent. It has an annual net rental of $72,000.
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Monday, 17 November, 2008 |
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Recession fears have buyers being even more cautious
By Graham Skellern, Bay of Plenty Times
Tauranga’s residential property market remains locked in its biggest slump in sales activity for nearly a decade.
The slide in volume began last December and has continued unabated. The spectre of a global economic recession is making a stronger impression on prospective buyers than falling mortgage interest rates.
The latest New Zealand Real Estate Institute figures show the number of sales at Mount Maunganui and Papamoa slipped to 52 in October, four less than in September and half the volume of October last year.
The median selling price also fell to $398,750 from $412,500 – with most activity in the $500,000 and under price bracket.
Across the harbour in Tauranga, sales last month reached 95 after touching 100 in September. The monthly total went as low as 74 in April but has levelled out in the past four months in the 90’s – comparable to mid 1998.
Volume peaked in October 2003 with 195 sales on the coastal strip and 294 in the other Tauranga suburbs.
Neville Falconer, a Tauranga based REINZ Councillor, said “its steady as she goes. The market has settled in to a fairly stable pattern”. Mr Falconer said the level of activity couldn’t get any lower in a city the size of Tauranga.
But he didn’t expect the situation to change much in November. “It doesn’t feel a lot different to this time last month or the month before. We don’t see any great investor activity”.
Gill Beadle, spokesman for Eves and Bayleys, said: “We have been having a bit of activity and I thought the figures would be better. We are getting enquiry but the buyers are educated and trained to find a bargain. And we are not getting a lot of vendors who are having to sell”.
He said the biggest problem was a reduction in listings and “there’s not as big a choice for buyers as you’d think”.
The residential property market was driven by confidence, and people were unsure about how their job or business was going to finish up and were sitting on their hands, Mr Beadle said. But the market would not go away and people were watching it closely but doing little. “I don’t see any change in the marketplace this side of Christmas”.
Max Martin, Harcourts franchise owner in Tauranga, said house prices fell further last month and mortgage rates should be under 7 per cent by January/February – signs that the market should pick up “I do believe it’s a great time to be looking to buy”.
Significantly, the median number of days taken to sell a house in the Bay has stretched to 61 days – the same time as in October 2000. Three years ago, it was taking 30 days.
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Monday, 17 November, 2008 |
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Values fall faster than NZ average.
By Graham Skellern - Business Editor, Bay of Plenty Times
House values in the sluggish Tauranga residential property market are now falling faster than the national average. The latest QV Valuations figures show property values slipped by 7.9% over the year ending October, based on sales recorded over the previous three months. QV Valuations last calculated a fall of 7.6% for the 12 months to the end of September.
The average sale price in Tauranga decreased to $436,765. Nationally, property values fell another 1% from 5.8% to 6.8% in October. The average New Zealand sale price last month was $379,920. National QV Valuations spokesman Blue Hancock said there appeared to be uncertaintly in the market, with many buyers and sellers waiting to see any impact from the financieal crisis, dropping interest rates and the election before committing to property trasactions.
Shayne Donovan-Grammer, manager of QV Valutaions in Tauranga, said there were no signs of a spring improvement in the market. He said volume remained low as many buyers believed prices were going to drop further in the coming months. "The properties that are selling present characteristics to the buyer which are exactly what they are looking for, as long as the property is marketed at a realistic offer price" said Mr Donovan-Grammer. He said the drop in interest rates was certainly welcomed but they needed to drop further to stimulate the property market. "Recent interest rate drops have buffered the increased cost of living but aren't substantial enough to re-ignite activity. In order to kick start the market, several ingredients are required". Mr Donovan-Grammer named them as: a belief that the credit crisis is over, a higher degree of perceived job security, and lower interest rates.
The Bay of Plenty Times reported last week that there has been a spike in luxury apartment sales during October, with out-of-towners deciding to re-enter the property market and buy their holiday homes near the beach. Harcourts sold 10 apartments last month, most of them in downtown Mount Maunganui. Tauranga's falling house values are not unusual. In the main urban centres, Hamilton's property values fell 9%, Dunedin minus 8.2%, Christchurch down by 7.8%, Auckland minus 7.7% and Wellington down by 6.1%. QV Valuations reported a greater variation in falling values across the main provincial centres. Rotorua (minus 9.4%), New Plymouth and Queenstown (both minus 8.1%) declined further. But the Nelson (minus 4.9%), Hastings (minus 5%) and Napier (minus 4.3%) markets were steadier.
The Western Bay District's property values are also hanging on. In that district, the values slipped from 3.2% to 4.6% in the year ending October and the average sale price was $431.133. |
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Tuesday, 28 October, 2008 |
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First-time buyers tipped to win as mortgages and house prices fall
The number of people owning their own homes is expected to rise as interest rates fall and borrowers enjoy savings of about $7000 a year on mortgages.
Auckland loan specialists Cairns Lockie have calculated that people paying about $32,000 a year at last year's high interest rates of 10 per cent could be soon paying $25,000 if rates fall to 7 per cent.
House prices have also fallen over the past six months, the business says, and 10 per cent to 15 per cent discounts are not unusual.
The drop in prices coincided with mortgage rates falling and there is a prospect of further cuts, all helping house buyers.
"The affordability of buying and owning a house is improving," Cairns Lockie said.
"This is particularly important to first-home buyers, because each 1 per cent drop in rates means considerably more people can enter the market."
Most banks cut their interest rates last week, some to just below 8 per cent, after the Reserve Bank reduced its official cash rate to 6.5 per cent.
Kiwibank, Westpac, TSB and ASB have reduced rates, and other banks are likely to follow.
Real Estate Institute past president Murray Cleland said interest rates had been too high.
It was common sense that if they came down to about 7 per cent, that would benefit first-home owners.
They could also benefit from cheaper houses, although Mr Cleland thought the fall in prices had been exaggerated.
There had been attention on sellers who, because of financial pressure, used sale tactics such as the $1 auction reserve Browns Bay house featured in yesterday's Herald.
"Prices have certainly eased off, but there is no panic at this stage."
Mr Cleland said New Zealand was not like the United States, where there had been huge numbers of mortgage default foreclosures.
"The market will level out and it will be business as usual."
He said the lower rates would give people with roll-over mortgages more cash in the hand and make them better able to hold on to their properties.
Mike Pero Mortgages chief executive Shaun Riley said the Reserve Bank's 1 percentage point interest cut would help restore confidence to the housing market.
"Now is a good time for first-home buyers and property investors," he said.
"House prices have fallen over the past year, and with the prospect of lower interest rates, things are finally starting to look up for those wanting to buy their first home or invest in property."
People with a $200,000 mortgage could be saving about $40 a week, he said.
Lincoln University property studies professor Chris Eves said falling property prices had resulted in people owing banks more money than their house was worth.
He said up to 130,000 people might now have negative equity in their houses.
Professor Eves said these were people who borrowed more than 80 per cent of their home's price in 2006 and last year.
It might take five to seven years for houses to recover their value.
Those forced to sell were most affected by the negative equity trap.
Source Anne Gibson and Angela Gregory NZ Herald 28 October 2008
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Tuesday, 16 September, 2008 |
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Vendors dropping prices to meet subdued market
Tauranga house values have now fallen more than 5 per cent in the past year, after the residential property market took a hit during the cold winter months.
The values, and prices, held up well as monthly sales this year hit their lowest ebb in a decade.
But the pressure of the property slowdown has had a telling effect – with many keen vendors having to reduce their original asking price by thousands of dollars to achieve a sale, thus affecting current valuations.
QV Valuations’ latest figures show house values in Tauranga dropped 5.3 per cent – calculated on sales for the three months ending August compared with the same period last year. The national average produced a decline of 4.5 per cent.
In the last survey period to the end of July, values had declined 2.6 per cent – just behind the national average of a 2.2 per cent fall.
The average sale at the end of August across the whole of Tauranga was $445,203 but the QV graph, tracking market value, began heading south last month.
Blue Hancock of QV Valuations said there were definitely more properties selling at reduced prices as vendors adjusted their expectations and meet the market.
He said areas on the fringes of main centres and holiday homes were particularly affected as increasing commuting costs and decreasing discretionary spend became key considerations.
Shayne Donovan-Grammer, QV’s Tauranga-based manager, said the months of July and August were “quite bad – our phone stopped ringing. A decline of 5.3 per cent might be a bit light. A true reflection could be more like 10 per cent.”
He said the established (central) suburbs were still holding their own but apartments, sections, and new homes in subdivisions were badly affected.
“They are sitting ducks at the moment – and if they are moving then sales are taking place at between 10 to 20 per cent bellow the valuations of the same time last year,” said Mr Donovan-Grammer. “The collective figures can be deceptive and buyers have the upper hand, with the luxury of choice.”
He said real estate agents had reports a pick-up in inquiry over the past few weeks and house sales should increase slightly in the short term.
“This can be put down to the changing of the seasons and potentially to some buyers believing the market has hit its low point.”
“While this small burst of activity may not last, it does show that vendors who have held on are now more open to the offers that are being tabled,” said Mr Donovan-Grammer.
He is not sure whether the market has hit the bottom. “I don’t think it’s going to get any better for quite a while – and there’s a chance nationwide it could get worse. But Tauranga holds up better than other areas.”
Mr Hancock said many buyers were realising that price decreases were making it a good time to buy and they could bargain strongly. As a result, there would be further declines in value before the markets level out.
On the latest national QV figures, Tauranga is stuck in the middle, Gisborne (down 10.4 per cent), Hamilton (down 8.5 per cent), Palmerston North (down 8.1 per cent) and Dunedin (down 7.8 per cent) suffered the largest decline in property valuations for the year ending August.
The Auckland area and Christchurch were down 5.8 per cent, while Wellington’s valuations fell 2.9 per cent, Nelson 3.7 per cent, Queenstown Lakes 3.4 per cent and Rotorua experiencing a fall of only 0.3 per cent.
Invercargill was the last provincial centre to drop into negative growth, with a fall of 0.1 per cent.
Source: Graham Skellern, BOP Times Wednesday September 10 2008
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Monday, 11 August, 2008 |
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NZ Herald - Sunday 10 August 2008
The housing crash is plunging more homeowners into negative equity, with their mortgage debt exceeding the value of their property.
Falling values mean New Zealanders who bought property from mid-2006 to the end of last year will be in negative equity now if they put in a deposit of 15 per cent or less, says Chris Eves, property professor at Lincoln University in Christchurch.
This is the most significant scale on which negative equity has struck the country. In previous downturns, those who were caught with negative equity tended to be developers and larger players.
"What we're seeing this time is a lot more mums and dads being hit," says Eves.
"What's changed in this cycle is the number of New Zealanders who have an investment property compared with the number in the last downturn. That percentage has increased significantly."
While there is a lack of data publicly available on the number of New Zealand homeowners in negative equity, it is likely to match the proportion in Britain, which is experiencing a comparable housing slump.
British house prices are down 11.1 per cent from their peak last August, while Barfoot & Thompson figures for July in Auckland, out last week, show its average house price was also down 11.1 per cent from its peak in December last year.
Commentators in both countries are predicting further price drops of as much as 35 per cent. Standard & Poor's analysts say one in seven British homeowners could be in negative equity by next year.
Eves forecasts that, overall, New Zealand house values will slump by 20 per cent - but in more exposed markets, such as investment property, he predicts drops of up to 35 per cent.
More than 60 per cent of those who borrowed money to buy an investment property in the past two to three years using equity in their own home as a deposit will have negative equity in the rental property.
Most of that money went into the apartment market, which is taking the biggest hit now, with these investors facing considerable losses.
Eves points to small apartments in inner-city areas bought by investors last year as falling in value the most.
He says these buyers have typically borrowed 100 per cent of the purchase price, using their homes as security.
"They are looking at losses in equity of 20-30 per cent, so they are definitely in negative-equity positions."
But the problem spans the spectrum of the property market - from low to high end.
Meta Mortgages' Mark Jurgeleit says many ordinary investors around the country are now looking at negative equity in properties they haven't even settled on yet.
Those who bought properties off the plan before the market crashed - often through property marketing companies - must now settle on properties valued at 20-30 per cent less than they sold for before they were built.
"The reality is they will soon have to borrow and hand over money for a property that is worth up to $100,000 less on settlement than they paid," says Jurgeleit.
He says "dubious" marketing was used to take advantage of "naive, unsuspecting people, taking hard-working mums and dads back 20 years because they trusted in supposedly 'independent' valuations commissioned by developers or marketers".
In some cases, property marketing companies led buyers to believe they would arrange for the property to be on-sold before they would have to settle the purchase.
Loose lending criteria by banks during the boom have contributed to the amplified scale of the problem. When prices rise as quickly as they have in the past five years, lending criteria is then stretched.
Lending practices have tightened again but Eves says this is a "horse has bolted" approach, although he acknowledges looser lending was driven by market competition.
"Finance companies were quite happy to lend 100 per cent," he says. "They were quite happy for second mortgages and in a way that drove more traditional lenders to take more risk to compete.
"The finance companies were the ones with the less stringent lending policies than the banks, so they have more exposure to negative equity."
Second-tier lenders took on the borrowers unable to get finance from traditional lenders, and those people are at the greatest risk from negative equity.
"They're the ones we're seeing going down now. It's higher-cost lending anyway, and as these finance companies are wound up, anyone who's borrowed through them may have their mortgage called up."
For those who have borrowed only for their own home, provided they are able to meet their repayments and are not forced to sell, Eves says the bank "won't want to know" about negative equity.
But being in negative equity has practical consequences if they default on repayments and the bank decides to force the issue.
"If they have a negatively geared investment property and they can't meet repayments, that's where they'll suffer," says Eves.
"People may have to downsize their homes and use the equity to pay out the investment property."
He foresees banks soon requiring those buying investment properties to put up 20 per cent deposits - even though they have equity in their own home.
"That is something that definitely was not on the books six to 12 months ago."
Then, banks were allowing those with equity in their own homes to borrow 110 per cent on their investment property purchases to cover legal and other associated costs.
Another consequence of plummeting property prices is that it will become difficult for those rolling off fixed-term mortgages to refinance with another lender - or even their existing one - because they will be required to provide valuations, which are likely to reveal they have slipped into negative equity.
"If they purchased the investment property 12 months ago for $250,000, borrowing 100 per cent and using their home as security, and the market has dropped 20 to 30 per cent, when they go to refinance they find the property is worth only $200,000," Eves says.
"That $50,000 has to be covered somewhere. They can either take equity out of their own home or sell and pay it out."
He says many families will face this situation in the next 12 to 18 months, and those who are coming off fixed-rate mortgages can prepare themselves for higher repayments by reviewing their discretionary spending.
"We're starting to see people do that, with internal and external tourism declining and public transport use increasing."
He advises against cutting out insurances as a way of stretching the family budget.
And he says it is preferable to carry additional interest costs if possible for the next three years than to sell up, as they will be less than the hit people will take from selling their house while the price is low.
"If someone purchased a house for $400,000, and they're looking at a drop in the market of 15 per cent, that's a $60,000 loss - that's a lot of interest.
"So if you can cover the interest you are a lot better off than if you put the place on the market."
The good news is that with finance companies now cleared out of the market, banks are getting more money in deposits than in the past six years.
This means they need to borrow less from overseas to lend out, which will help cap fixed-interest rates.
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Tuesday, 17 June, 2008 |
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The myth that house prices never fall may be shattering, writes Simon Louisson
The Economist magazine recently recalled former US Fed chairman Alan Greenspan’s prediction that house prices “have rarely fallen and certainly not by much.”
In real terms, US house prices are down 18 per cent on 2007.
Lots of people believe that is unlikely to happen here. But it is starting to happen and may well be equally severe.
The Reserve Bank this month forecast a 13 per cent fall over three years. The bank helpfully pointed out house prices fell 38 per cent in the wake of the first oil shock of the 1970s.
BNZ economist Mark Walton points out that to put this into context, you have to look at the huge rise in house prices, both here and in the United States, that led up to the current situation.
What is happening is what sharemarket analysts describe as a “healthy correction” – when a market falls after a big run up.
Real Estate Institute figures this week showed the median price in May was down 1.4 per cent on a year ago. But those figures understate the fall as there was a big drop in sales of houses under $600,000 against a small increase in figures over that price.
The most worrying aspect of the REINZ figures was that sales were down a massive 53 per cent on a year earlier. The time taken to sell lengthened nationally to 49 days in May, compared with 30 a year ago.
Mr Walton said the two main indicators of future house prices are days to sell and the turnover, and they are getting worse.
“The turnover last month just collapsed from pretty low levels. There was no sign yet that we have seen the bottom of the housing market in terms of house prices.”
The market is being propped up by people pulling houses off the market rather than selling at much lower prices than they want, Mr Walton said.
“If those properties actually went through to sale, then the numbers would look even worse than they actually are.”
Massey University professor of property Bob Hargreaves said economists have been predicting a 20-40 per cent plunge for a while.
He sees prices falling about 10 per cent, but not crashing. “When times get tough, people sit tight.”
He said 50 to 70 per cent of the houses sold every year are people upgrading or downgrading or selling investment homes.
He said the market was “actually very sticky on the downside, because people hold their houses off the market.”
Prof Hargreaves said banks here have not been so badly exposed to the US sub-prime mortgage fiasco.
“I’m a bit more optimistic than some of the other commentators.”
Mr Walton, whose bank estimates houses are overpriced by 30 per cent, said the market downturn has big implications for the economy and the prospect for recession.
Because home owners are not feeling so wealthy, they cut back on spending. That has coincided with sharp increases in prices.
The BNZ believes the Reserve Bank’s assessment is highly plausible “and broadly consistent with where we think the housing market is likely to go – a fall in the 10 to 15 per cent range and a risk it could be more than that.”
BNZ believes the economy shrank in the first quarter but a “technical bounce” in Q2 may see recession (two negative quarters) avoided. But the trough has begun earlier than expected and may last longer.
“Whichever way you look at it, New Zealand has to go through a period in which consumers spend less than they earn, after years of doing the opposite.”
In an article titled "Always look on the bright side", Mr O’Donovan said there are good reasons to expect better times next year. He pointed to high export prices and the Government’s tax and spending initiatives.
But he said an adjustment needed to happen “and the ironic truth is that the more painful the adjustment, the sooner good times can return.”
Source: Simon Louisson, BOP Times Saturday 14 June 2008
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Monday, 16 June, 2008 |
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Homebuyers battling Auckland's housing slump are finding hope in the most unlikely locations - blue-chip suburbs.
Information released to the Herald on Sunday reveals top-end areas such as Westmere, Epsom and Kohimarama have suffered the biggest falls in sales and values. In contrast, Auckland's best-performing suburbs include Mt Wellington, Otahuhu and Waiheke Island.
The QV analysis used three levels to read data - median sales price, average sales price and the number of sales since the end of the last quarter.
Kohimarama suffered a decline in median and average sales price of more than $300,000. The figure for Epsom was much lower, but more than $100,000.
The falls could help revive the market in those areas, bringing previously unobtainable homes into the reach of certain buyers.
But that's cold comfort to Graham Tattle, of Direct Reality, the franchisee of Premium Reality's St Heliers branch.
He is fighting a civil case against his former landlord of 347 Tamaki Drive over claims he hiked rent by 30 per cent and changed the locks.
Source: Anna Rushworth and Jacqueline Smith, New Zealand Herald on Sunday, Sunday June 15, 2008
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Monday, 16 June, 2008 |
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The property downturn is not a blip and Auckland's top suburbs are suffering, with the desirable suburbs of Kohimarama, Greenlane, Westmere, Point Chevalier and Epsom declining more than any other.
The best-performing suburbs in Auckland are Ellerslie, Mt Wellington, St Johns, Otahuhu and Waiheke Island, according to information released to the Herald on Sunday.
But sales are so low across the board that it is inaccurate to judge trends by median sale prices. Some suburbs had fewer than 10 sales in the past quarter.
The Quotable Value analysis uses three levels to read data - median sales price, average sales price and the number of sales from the end of the past quarter until now.
Kohimarama median and average sales prices have fallen by more than $300,000 and Epsom prices have fallen by more than $100,000. Greenlane prices have declined by more than $150,000 and Pt Chevalier prices have decreased by about $100,000.
But the Kohimarama and Epsom declines in average and median sales prices reflect cheaper properties selling rather than a major fall in value, says QV's Jonno Ingerson.
The downturn is also hitting provincial areas across the North Island and the property market has already gone backwards in Gisborne, New Plymouth and Palmerston North. Other towns are expected to follow.
Property investor Kieran Trass, of suburbwatch.co.nz, says the real estate industry needs to stop waving around the median house-price figures and accept the market is crashing.
Trass says that emotional buyers - those who pay a high price for their dream home or to live in a desirable area - have been holding up the market until now.
An increasing number of homeowners will suffer negative equity by the end of the year and not as a result of people "talking down the market".
He says the statistics that show average property sales are not falling in value are flawed and they are convincing homeowners or prospective buyers to make devastating decisions. He has lost $1 million in equity on his own portfolio in a year.
"If you bought a property a year ago and put in a 20 per cent deposit I'm convinced you've lost it," he says.
Trass says Mt Roskill is suffering, based on the data that's coming out in suburbwatch.
In the first three months of this year, values there dropped by more than 6 per cent - meaning a $400,000 property would have dropped by $25,000 in three months.
"That's a lot of money and a lot of value disappearing, and that trend doesn't look like it's going to change in a hurry. It's just a matter of time as it filters through the market."
Trass says people need to come to terms with the fact that property is more unaffordable than it has ever been before and the market needs to go through a correction.
"The reality is, to buy an average house in Auckland you need to have a household income of more than $150,000. We're not talking about a luxury home here, we're talking about an average property priced at $350,000, and that's assuming you put in a $35,000 deposit - 10 per cent. "That's looking pretty difficult, I would think, for the average person in Auckland." Trass says investors need to prepare for many years more of "difficult times".
Contrary to rumours, the downturn will not be over by spring. "People must realise this is not a quick fix - that property values will plummet overnight and [then] suddenly everything [will] be sweet. That's not the case. This is going to be a long slog."
As the market turns, there are many investors who are finding themselves in negative equity - and Trass predicts this will get worse as the year progresses.
David McEwen, from Investment Research Group, told the Herald on Sunday negative equity was already on the rise and the most vulnerable people were those who entered the property market in the past two to three years to take advantage of banks' aggressive lending.
"The market has been very bullish. People have seen property as an automatic way to make money, so their risk tolerance increased and they felt comfortable about buying property having virtually no equity or security."
McEwen says statistics don't reflect the extent of pain of that is being felt in some areas, especially by owners of apartments and townhouses. His advice to investors experiencing negative equity is to overcome their natural desire to walk away from the property.
"If you are trying to service a mortgage and are barely getting by, and the size of the mortgage is larger than the value of the house, the temptation is to stop trying to pay the mortgage," he says.
"Unfortunately, what people don't realise is if you hand back the keys of the property to the bank, the bank will sell the property and if there's any shortfall, they'll still come after you for the remaining amount."
He recommends waiting for the downward trend to correct itself, and talking to the bank about options for changing the mortgage.
Wayne Besant, managing director of ANZ Retail, says negative equity becomes an issue only when owners need to sell the asset and consolidate their losses.
"The property market is certainly softening as part of the current cyclical downturn," says Besant.
"Investors who have bought in a high-price environment may be in a situation where the current market value of that asset has now dropped, and we are seeing a small number of clients in that situation."
But he points to the recent ANZ Property Investor survey, in which 90 per cent of residential property investors say they are adopting a buy- and-hold strategy.
"Taking this long-term view, any short-term negative equity is, in effect, immaterial," he says.
The survey also indicates almost half of investors have more than 50 per cent equity across their portfolios.
"If a client wishes to relieve a specific cash-flow situation on a property, we have a number of options available - including extending the term, restructuring the loan or adopting an interest-only position for a period," says Besant.
"Each client situation is different - the size and complexity of property portfolios, locations of the properties and tenancy rates all have a bearing on how we can help."
On the other side of the transaction, buyers can make the most of low values but need to think outside the square.
John May, director of property investors association thetraders.co.nz, says: "You can go in and offer crunch prices but you are still only going to get a small proportion of them, because it comes down to the individual vendor's finances. If they are desperate to get out, great, but others may not be, so all that will happen is they will withdraw their property from the market."
He says it's often not so much the money as the rest of the deal that clinches it. Some of his ideas for buyers include offering a more reasonable price if the vendor is prepared to leave money in the property, paying a higher sum for a subdividable property, and looking for opportunities to create extra bedrooms or add features.
Trass says the reality of the loss in property values has plunged New Zealand into grief and, like any grieving process, there are different stages to work through.
"My suggestion to people is this: the first stage is denial - and it appears some in the industry are still in denial. Some people have got to the blame phase, where they are pointing the finger at people and saying, 'stop talking the market down'. The sooner we can get to the third stage, acceptance, the better."
Source: Jacqueline Smith, New Zealand Herald on Sunday, Sunday June 15, 2008
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Monday, 16 June, 2008 |
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BNZ chief economist Tony Alexander is defending the media against real estate industry accusations that it is to blame for the housing market slump.
Last week Alistair Helm, chief executive of realestate.co.nz, the website owned by the major agencies, said negative stories were driving down house prices.
But Alexander says if there's any blame to be attributed to the media, it would be "less than 5 per cent" of what is actually causing the market to correct.
Instead, he says the Reserve Bank has been explicitly trying to force a housing market correction for more than four years by raising interest rates.
Instead, he says the Reserve Bank has been explicitly trying to force a housing market correction for more than four years by raising interest rates.
Peter Thompson, director of Barfoot & Thompson, says the media have played a big role in the property downturn.
"The more you read in the news the more you believe it," he says. "We were hearing economists saying prices were going to fall anywhere between 10 and 30 per cent when, in reality, our figures and the Real Estate Institute's showed prices were holding their own."
However Alexander says the media didn't really "pick up aggressively" on the weakness in the housing market "until earlier this year when we saw the strong annual decline, and yet we could start to see the increase in the number of listings from the middle of last year".
Barfoot & Thompson's Auckland figures show new listings started increasing strongly in the June quarter of last year, when fixed mortgage rates reached 8.5 per cent and kept rising. "That's when we saw retail spending growth stop and vendors begin flooding the market with properties, as debt servicing costs are too high," Alexander says.
Real estate agents say buyers have been scared by the media, but Alexander says they started backing away in the June quarter last year because they were finding interest rates too high.
Alexander says he can understand why real estate agents are looking for someone to blame: "Not all of them want people to be highly informed about the true state of the market."
The challenge for real estate agents, he says, is to make vendors realise there is an oversupply of properties on the market, and so "negative commentary" is useful for convincing vendors to cut their price.
Vendors are already taking properties off the market, realising if they leave them sitting there unsold they become "tainted" properties - and buyers will only throw "extremely insulting" offers at them.
Owners are realising that they can get good rentals because there is a shortage of rental property around the country. Landlords with existing tenants are getting increases of 5-10 per cent. When tenants change, landlords are getting increases of 15-25 per cent.
Source: Andrea Milner, New Zealand Herald on Sunday, Sunday May 18, 2008
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Thursday, 12 June, 2008 |
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Commercial and industrial property has certainly become flavour of the month with Colliers International securing nearly $16 million worth of sales in Tauranga.
Simon Clark, Colliers local director and licensee, said a lot of novice investors were out and about looking to see what was happening in the market, but experienced investors, who have held property before, were getting in and doing deals.
“The properties are cheaper than they were 12 months ago and the buyers are seeing value for money – the good thing is there are sales happening in a supposedly bad market,” said Mr Clark.
After sitting on the market for two months, a large industrial site owned by Downer EDI (formerly Works Infrastructure) on the corner of Totara Street and Taiaho Place, Mount Maunganui, attracted three offers.
Port of Tauranga sealed the deal paying $4.7 million for the 1.8 hectare property that had been used for a bitumen plant.
The small bitumen tanks and building including offices will be removed before the Port takes possession in August.
Two properties were sold at the latest Colliers auction. The 2600 sq m Hirepool site on the corner of Pyes Pa Road and State Highway 29 fetched $2.8 million for a yield of 7 per cent, based on rent of $180,000 a year – which increases to $190,000 in August.
A new 215 sq m retail unit at Papamoa Fashion Island Shopping Centre sold for $1.25 million at a yield of 9 per cent on the investment.
The shop is empty, but DressSmart, who has the management rights for Fashion Island, is paying rent of $112,273 a year with six years of the lease to run.
After the auction, a Tauranga City Council-owned site used by Excell Corporation in Chadwick Road, Greerton, was sold for $3.45 million to a Putaruru businessmen, after the property was passed in the $3.75 million.
Excell pays a rent of $265,397 a year on lease with more than four years to run and the new owner is looking at a yield of 7.7 per cent.
Across the harbour, a three-level commercial building on 600 sq m of land in downtown Mount was bought by a local investor for $3.5 million, at a yield of 6.35 per cent.
The property has three shops on the ground level, carparking for 14 vehicles on the first level and office space used by PowerCo on the top floor. The combined rental income is $222.423 a year.
Mr Clark was also confident of selling two buildings, tenanted by ASB Bank and National Bank at Fashion Island, but they were withdrawn just before the auction.
Mr Clark said the owner had a change in circumstances, but “incredibly, we had 96 enquiries for the two buildings.
“We would have sold them for record prices – even in a good market we wouldn’t get that many inquiries.”
Source:- Graham Skellern, BOP Times, Wednesday 11 June 2008
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Tuesday, 10 June, 2008 |
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Homeowners face at least a three-year wait before properties begin to return to current values, says the Reserve Bank.
In a gloomy report on the economy, the bank predicted house prices would fall 13 per cent over the next three years.
Once inflation was taken into account, the real drop would be more like 22 per cent.
There was one piece of good news for homeowners – Reserve Bank Governor Alan Bollard said if the economy did not pick up, he would try to kick-start a recovery by dropping the official cash rate.
His comments prompted an immediate reaction from banks, Westpac and ASB dropped their two-year fixed mortgage rates from 9.4 per cent to 9.2 per cent.
But Dr Bollard had other bad news yesterday.
Inflation is predicted to rise to 4.4 per cent next year before falling back below 3 per cent, and unemployment is also expected to rise, hitting 6 per cent by 2011.
Yesterday the Reserve Bank pointed out things could be worse for the housing market.
House prices fell 38 per cent in real terms during the oil shocks of the 1970s, and the credit crunch sent the United States housing market down 16 per cent in the year to March.
But Westpac chief economist Brendan O’Donovan said it was rare to see house prices drop the way Dr Bollard had predicted.
House prices had continued to rise even during the severe housing market downturn of the 1970s, he said, although at a much slower rate than inflation.
Nominal house prices fell in 1998 and 2000, but even in 1998, the larger drop of the two, prices fell only 4.1 per cent.
This time, the Reserve Bank has forecast a sustained drop over three years, although it says the steepest fall, of 7.7 per cent, will be over by the end of the year.
Falling official interest rates and a recovery in the world credit market should put the housing inflation rate back to zero by mid 2011, said the bank.
Mr O’Donovan said prices would be back at their current levels in five years.
“We’re living through most of the drop right now.”
Goldman Sachs JB Were economist Shamubeel Eaqub said average mortgage rates would keep going up over the next two years as people on lower fixed rates rolled on to the higher rates being charged this year.
People fixing their mortgage rates now would face high rates for years to come.
Mr Eaqub said high interest rates meant it was not necessarily a good time to buy a first home.
“Everyone is better off just waiting and saving some money. I wouldn’t buy until rates were quite a bit lower than 8 per cent.”
Property market analyst Kieran Trass warned that the recovery might be slower than predicted, as mortgage rates would rise further if banks increased lending margins to cope with the cost of more mortgagee sales and worsened lending terms with overseas banks.
“I believe this is for property what October 1987 was for the share-market,” he said.
But Real Estate Institute president Murray Cleland was surprised at the Reserve Bank’s gloomy predictions.
He said institute figures out next week would give a truer picture of what the market was doing.
Figures from Auckland real estate company Barfoot and Thompson showed the average sale price slightly increased last month despite the number of home sales falling.
Mr Eaqub said house prices were definitely falling. He expects an at least 15 per cent drop in the next 18 months.
Source:- Eloise Gibson, Consumer Affairs Reporter, New Zealand Herald, Friday June 6 2008
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Monday, 28 April, 2008 |
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Developer knocks $500,000 off harbourside apartment’s tag.
A Tauranga developer has slashed $500,000 off his harbourside luxury apartments and others are also cutting prices as they battle a quiet market.
Many apartment owners at Mount Maunganui are slicing an average $50,000 from their asking prices – representing an 8 per cent decline and back to levels seen two years ago.
One salesperson told the Bay of Plenty Times: “I won’t take an apartment unless it’s realistically priced. Owners are definitely putting $50,000 less on paper for a $600,000 apartment, and in some cases it’s been more.”
“Unless they bought within the last two years they wouldn’t be losing any money, but (listing) prices have been falling since Christmas.”
The salesperson, who did not want to be named, said interest had picked up over the past fortnight.
“We sell a lot of apartments to Waikato farmers, and now that the rain has arrived and the drought has broken they are coming over to have a look. There’s so much choice, it’s harder for them to make a decision.”
None of the 12 Nautilus apartments at Sulphur Point have sold since they were completed last September.
Dublin-based developer Aidan Harrison, of Channor New Zealand, has made an across-the-board reduction of more than $500,000 for the spacious luxury apartments facing the entrance to Tauranga Harbour.
The lowest-priced apartment on the first floor is now $1.1m instead of $1.75m, and the highest is $1.85m instead of $2.4m. But the two penthouses are still selling for $2.9m.
Nautilus sales manager Jan Wilson said: “We were adventurous to begin with and the price range is now more affordable. We are now hooking into intense television advertising and this has helped renew interest.”
She said a lot of prospective buyers had been seeking to do a deal by trading their own property for a new apartment. She even had an offer of an avocado orchard.
“We could have sold a couple if we had done that but the developer is not keen – we have a bigger stage happening here down the track,” said Ms Wilson.
Mr Harrison will be re-developing Marine Park in Cross Road – Nautilus Apartments and the adjoining boatstack are part of that – and hopes to establish an information-technology business park.
Four new apartments in Otumoetai with Waikareao Estuary views have sat on the market for a year. But the developer, who didn’t want to be named, has a conditional contract on one and tenders for two others close next week.
“Five people have picked up tender documents and there’s been more interest in the last six weeks than in the past six months,” he said.
He has dropped his price by $150,000 or 15 per cent on the unsold $1m apartments.
“There are a lot of apartments sitting around and there is no pressure on anyone to buy. The market is dead anyway – building costs are going up, so are other costs and the second-tier lenders have taken flight: it is now difficult to fund new apartments unless they are pre-sold,” he said.
Yesterday, three recently completed luxury apartments in Bureta and Matua – valued at more that $1m – were up for auction but there were no bids.
Simon Martin, sales manager and director for Harcourts, said the apartment market was the quietest in eight years. His company had 150 apartments on its books.
“We’ve had single-figure apartment sales at the Mount for each of the past six months and sellers are now realising they have to reduce their prices in an effort to get a sale,” he said.
But that’s not the case for the 11-level Pacific Apartments being built in the high-rise zone of Maunganui Road.
Developer Philip Lindsey will be putting prices up by 3-5 per cent this year. A $1m apartment would increase by $25,000. Costs have gone up since they started, he said.
Forty of the 70 apartments in the diamond-shaped Pacific building have sold – 10 in the past nine months – since the development was launched in March last year.
Mr Lindsey has a conditional offer of $5.7m for the 445sq m penthouse, and a Kiwi expat working in London paid $2.5m for two apartments on the eighth floor.
Source: Graham Skellern, Bop Times 26 April 2008
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Monday, 21 April, 2008 |
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Ownership plummets to 48%
The enduring kiwi dream of owning your own home is now out of reach for one in every two people living in Tauranga because of rising house prices and living costs.
The latest Quality of Life survey shows that home ownership has plunged to 48 per cent in the city as more and more younger people are forced to rent.
Surprised by the extent of the fall, local valuer Roger Hills said the New Zealand dream was becoming harder to turn into reality: “It’s extremely difficult – in some cases, almost impossible – for the first homebuyers in the medium to low earning bracket to own their own home.”
In 1991 people were sitting pretty with 78 per cent owning their own houses – then the rate of ownership slipped steadily.
Tauranga was not alone. The ownership rate in the 11 other major cities surveyed averaged 49 per cent, down from 62 per cent. The rest of New Zealand was 54 per cent, down from 68 per cent.
Hamilton and Manukau were 48 per cent last year, while Auckland plummeted to 38 per cent from 52 per cent in 2001. Christchurch and Rodney had the highest level of ownership at 55 per cent.
Mr Hills, a director of Tauranga-based Hills Haden, said there was a tremendous amount of investment between 2002 and 2005, with people buying their second or third houses and renting them.
Also, many of the new apartments coming on the market were not owner occupied, creating a twofold affect on home ownership, Mr Hills said. It meant younger people found it increasingly harder to buy their own home.
“You are seeing more and more parents helping their children in to property, and that’s the only way they can achieve it,” he said.
From 2001 to last year the median price of flats and houses in Tauranga rose from $198,000 to $362,750, a leap of 83 per cent. Hamilton’s prices rose 84 per cent from $165,000 to $304,500. In 2003 and 2004, only 48 new apartments were built in Tauranga, but this jumped to 174 in 2005. Last year there were 85.
More people are waiting for a state house. In 2002 a total of 150 families were on the Housing New Zealand waiting list and this increased to 232 in 2006, up 55 per cent.
The Quality of Life survey said that if housing costs rose and affordability declined, then the need for emergency housing and housing for people with special needs would increase.
Mortgage broker Brian Berry, a director of Rothbury Financial Services, said he didn’t expect home ownership to drop below 50 per cent.
“That’s a big move – and the issue is affordability for first-home buyers” he said. “Rents were relatively cheaper than funding a mortgage, but rents are going up because of a shortage of good rental property on the market.”
Mr Berry said the average mortgage taken out by homeowners in Tauranga was $280,000. “That’s $520 a week and a couple would have to have a combined income of $70,000 to handle the loan.”
Dan Keller, president of the Tauranga Property Investors Association, said 70 per cent of houses were rented and 30 per cent owner-occupied in his home country of Switzerland.
“Plenty of people still want to come and live in Tauranga and I’ve noticed a lot of tenants looking around for a place – there is a shortage of quality rents.”
Mr Keller said housing in the city was too expensive. He didn’t think interest rates would fall for a while, and the rate of home ownership would not improve in a hurry.
The Quality of Life survey said rented homes increased 10 per cent in the 12 major cities from 1991 to last year.
By Graham Skellern – Bay of Plenty Times 11/12/07
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Monday, 21 April, 2008 |
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Economists are predicting house prices to keep plummeting for the rest of the year and say 2009 may see the slump’s lowest point with an almost $50,000 drop in the average home price.
The national average home sale price is tipped to drop to about $300,000 when the market bottoms out – which may not be until 2009.
Deutsche Bank chief economist Darren Gibbs says while affordability has improved, it will be even better in 12 to 18 months. Then, buyers should be able to take advantage of a $308,000 average and “markedly lower” interest rates.
BNZ chief economist Tony Alexander agrees saying prices will keep dropping. “There’s still a way to go.” While ANZ National Bank Limited chief economist Cameron Bagrie says buyers should be in “no hurry” to buy during 2008.
The predictions come as real estate agents reveal prices have plummeted by 10 per cent since a peak in November 2007 with no relief in sight from high interest rates. The Reserve Bank has been more conservative, forecasting only a 5 per cent drop in the average sale price.
Gibb’s $308,000 average house price predictions are based in part on watching the effects of huge slumps in Britain and the US where drops follow a “massive boom period”. The New Zealand housing market stands out as being overvalued to a similar degree as that of the UK – a market reportedly suffering its worst slump in 30 years, he says.
Gibbs says mid 2009 could be the best time to buy as there will not only be lower prices, but also “markedly lower” interest rates.
Real Estate Institute data shows the national average price is down to $349,000, from a record $352,000 in November and president, Murray Cleland, expects further weakening.
Most commentators agree the slowdown is only just beginning and first-time buyers locked out during the boom could benefit as overextended investors try to offload properties.
QV spokesman Blue Hancock says investors are looking to sell to reduce their exposure to increasing mortgage payments.
And with more properties being listed through bank-forced sales or the collapse of property investment schemes, Cleland expects more downward pressure on the market.
Bur Kieran Trass, founder of market monitoring site SuburbWatch.co.nz is warning prospective buyers not to miss out by being too greedy.
“If you can get into the market now and you couldn’t a year ago, why would you wait?”.
Trass predicts property will get cheaper for the next two years, but says no one will know the perfect point to take advantage of the property slump until it’s gone.
While there may be no rush, he advises those with a deposit saved to weigh up the advantages of leaving the “rent trap”. Peter Thompson, director of Barfoot & Thompson, says despite the price drops, buyers should not over commit financially as there could be unforeseen events like job losses in the future.
Andrea Milner reporting for HERALD ON SUNDAY 20/4/08
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Thursday, 17 April, 2008 |
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Colliers' auction sells $9m worth of commercial space
Local investors may be shying away from rental houses at present but they are still clamouring over well-located commercial property,
As the residential property market takes a turn for the worse, the Tauranga office of Colliers International sold $9 million worth of Mount Maunganui and Papamoa commercial buildings at its first major auction in six months.
Five of the six commercial properties went under the hammer, and the other has attracted two offers since it was passed in.
The Colliers staff were blown away by the interest. More than 150 people turned up at the Sebel Trinity Wharf Hotel and they had to open up another room to accommodate everyone at the auction.
"I thought there would be a lot of onlookers but everyone gasped at how many bids there were," said Simon Clark, Colliers director and licensee.
"People think commercial has been tainted by the state of the residential market - but the demands for good property is still there. Investors are still willing to pay very good prices for quality stock.
"The buyers could have got higher interest rates at the bank but they were taking a longer term view. You can hold commercial property for 10 - 20 years and make good capital gain," said Mr Clark.
There hasn't been a lot of good well-located property coming on the market lately and buyers saw the opportunity and went for it, he said. It was Colliers' most successful auction for nearly six years.
Two of the properties attracted 10 bidders at the auction. The vehhicle testing station on Hewletts Rd sold for $3m at a yield of 4.94 per cent and a buliidng housing Bay Chassis Works and Everwood Furniture on the corner of Hull Rd and Newton St fetched $2.045m, yield 5.92 per cent.
The Mount corner site of 2241sqm, with 24 carparks, produces rental income of $121,150 per year.
The testing station has been a feature of Hewletts Rd for 35 years but its lease was due to expire in four-and-a-half years.
The operator Vehicle Testing New Zealand (VTNZ) wanted to secure the high-profile site and bought the 4080sqm property from Tauranga City Council.
There was keen bidding while the return on money stayed above 6 per cent, but when the bidding went over that mark there were two left standing - VTNZ and an adjoining owner.
A 45sqm pizza shop in the Hot Spot retail/apartment complex on Adams Ave quickly sold for $380,000 at a yield of 5.52 per cent based on a rental of $21,000 a year.
Two retail buildings in the new Fashion Island shopping centre at Papamoa also attracted strong bidding.
The stand-alone Repco building, which has a renewable nine-year lease, fetched $2.025m at a yield of 7.21 per cent. Repco pays a net annual rental of $146,162. Nearby, the building housing Sportsworld and Nu-Dax fashions sold for $1.7m at a yield of 8.29 per cent based on net rental of $140,970.
Collision Repairs panelbeater will soon be moving into state-of-the-art premises - the spraypainting is on one floor and the panelbeating on the other - and its property on Hewletts Rd was passed in at auction. But Mr Clark is confident of concluding a deal around $1.1m.
Source: Graham Skellern, BOP TIMES APRIL 16 2008
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Thursday, 17 April, 2008 |
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Values in City are holding despite fall in volume
House sales in Tauranga's crumbling residential property market have hit their lowest ebb in more than a decade - and there's no sign of immediate improvement.
But on the positive side, Tauranga was the only main centre to increase property value growth, rising from 2.9 per cent to 3.7 per cent, Quotable Value figures for the three months to March 31 show.
According to the latest New Zealand Real Estate Institute figures, the number of unconditional March sales plunged to just 79 in Tauranga, excluding the coastal strip.
This is the lowest since December 1996, when 70 sale and purchase agreements were recroded. There was also a blip of 79 sales in January 2000.
The present volume is a third less than in the recent boom days - until the market corrected sharply at the start of this year because of high interest rates and the international credit crunch.
In the higher-priced development suburbs of Mount Maunganui and Papamoa, the fall in volume is just as alarming. There were 57 sales in March, the lowest in 10 years.
The volume hit 43 in July 2000, and 55 in May 1998, while June and August that year had 58 sales.
The sales activity at the Mount and Papamoa has slumped by a half over the past two years and also a thrid from the heady days of 2002-2005.
At the peak of late 2003, monthly volume was more than 150 at the Mount and Papamoa, and more than 250 for the rest of Tauranga.
It's even worse in the Western Bay's rural/lifestyle areas, with 38 sales in March compared with 84 in February and 139 in March last year.
"It's as low as many of us have experienced" said Gil Beadle, Marketing Manager of Eves and Bayleys.
"At the end of the last quarter in October, if you were talking of these (latest) levels, I would have said you need to go and get a proper job.
It has come as a surprise to us. The market is far from normal at the moment and we are going through a financial environment that we haven't experienced before. One or two salespeople will be dropping out" said Mr Beadle.
Agents are saying there are buyers out there but they are not rushing to clinch deals, thinking that prices will slide. At present, the market is in buyer's favour but prices have remained steadfast.
The median selling price in March at Mount Maunganui and Papamoa fell to $450,000 from $470,000 in February but is higher than the $433,500 recorded in March last year.
Across the harbour, the median slipped to $350,000 from $354,000 in February and $362,000 in March last year.
According to QV Valuations' latest figures, the average sale price (over the past three months) in the whole of Tauranga City has incresed slightly to $423,407.
But Shayne Donovan-Grammer of QV Valuations said stocks were building rapidly as more properties were listed but few were selling.
The build-up should lead to a softening in prices, particularly for those sellers who have to move on, he said.
The modern apartment and townhouse market has reached a crawl and even sales of the once busy suburban bungalows priced around $400,000 have slowed.
Mr Donovan-Grammer said a number of townhouses in the $600,000 to $900,000 category particularly in the inner suburbs such as Pillans Point had been for sale for more than a year, some approaching two years.
He said there was such disinterest in the apartment market that some had been traded with other residential property - including a cash component if the valuations were different.
John O'Donnell, principal of LJ Hooker Mount Maunganui, doesn't expect the market situation to change for at least six months. "We've had three consecutive low months - around 25 sales in each of them at the Mount - and, what's scary, they are usually some of the best months of the year" he said.
"It doesn't bode well for the winter - we could be heading for monthly sales below 20 and hopefully there will be more optimism in the spring".
Mr O'Donnell, who has operated in real estate for 23 years, said "this is one of the more difficult times I've seen".
He said there could be rationalisation in the industry but the professional salespeople will still do quite well.
"You have 80 salespeople and 13 offices at the Mount - and at present 25 sales a month. We are going through a pretty severe correction and the area would be well served with seven to eight offices, and 30 to 40 salespeople".
Tauranga's latest sales matched the national trend. The March volume fell to an unprecedented level of 5129 compared with 6356 in February and less than half the 10,989 sales in March last year.
National real estate institute president Murray Cleland said market confidence had taken a knock, especially in the lower end where sales of houses under $400,000 fell 23.18 per cent compared with an overall drop of 19.3 per cent in February.
Source - Graham Skellern, Bay of Plenty Times 15/4/08 |
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