Christchurch Real Estate

A New Generation Is Going To Change It All!

As you know I really believe in the Generations and their relevance to how and what they purchase. When it comes to Real Estate this is particularly important because you need to identify which property would suit a certain type of person and then from there you need to work out the way that you can market to that audience the best way. And so far every aged generation has been different in general. Previously we have grouped generations by the dates they were born. Baby boomers born 1946 to 1964-ish, Gen X born around 1965 to 1975 and Gen Y born around 1977 to 2000. Why were these generations grouped by years.  Generally its because they all shared the same social environment  that were present at the time and therefore generally speaking have similar core values.

However now there is something else happening. And no its not a new generation of people born after the year 2000. These people will all be under 10 still and I hardly think they will be buying real estate. No. It’s a new generation named Generation C. And it is unique as this is the first generation ever that isn’t bound by demographics. It’s a psychographic generation—it’s the generation who communicate using digital technology, they like being ‘in’ digital environments and they are a growing group of people.

Generation C is the world’s first opt-in generation, with an attitude that people of any age can choose to adopt and become one of this generation. And it is clear to see how! Take for example second life, a very out of it reality internet virtual life game. The average age of people on Second Life is 35 years old. But listen to this – its the same age group that accounts for much of the activity on Facebook, and for Twitter the age group skews even higher. People are choosing to become part of Generation C, rather than merely being born into it.

What does the C stand for? Well it’s Control, Communication, Contact and all that goes with it. Generation C is the generation who are in control. Information drive this generation. And we thought generation Y wanted things now. Try this generation. We want it now, and if we don’t get it we will get it from someone or somewhere Else. Its simple really. And you as a real estate agent need to be aware of it. There’s no longer a single dominant culture shaping our thoughts. Commanding the digital environment empowers this generation to carve out their identity by taking that control and making it ‘their own’.

Marketing to generation C is the tricky part. This generation know what they weant and where to get it. This is the internet age and the internet has largely created this generation. The time has come to engage the audience and not just tell them.

There is more on this at http://deonswiggs.com/this-generation-will-change-everything

May 10 2010 | Buyers and Sellers and The Market | No Comments »

The “A” Word

Auction – there it is, out in the open! Love ‘em or hate ‘em there is no doubt that auction is a common marketing strategy in Christchurch.

I make no secret of being a sales person who advocates auction to many of my clients, however, I do believe that it is not suitable for everyone and may not be the best solution in all market conditions. But this post is not about discussing the pros and cons.

Anyone who has regularly read my personal blog will know that I think that following the weekly results of auctions can provide a timely snapshot of current market conditions. So today at the Holmwood Auction Rooms – 12 auctions called and only 2 sold under the hammer. Not as bad as that in reality, I have a multi-offer to deal with tomorrow on my auction that was passed and there was bidding on about half of the auctions – and in at least 1 case it could be argued that the owner had an opportunity to sell but chose not to!

But that said, I think what can definitely be gleamed from our results today and those in other rooms around Christchurch, is that buyers have the upper hand right now. If you want to buy a home that is up for auction you are probably best served attending and waiting – if you don’t have to bid, why would you? Bide your time and make an offer afterwards – certainly as a strategy it is hard to argue with right now.

This begs the question of why the market is how it is. A number of factors spring to mind -  many investors are choosing to wait and see exactly what changes are coming in the budget, there has been a strong seasonal increase in listings and I detect a tightening of financial conditions – anecdotal evidence from clients suggests banks are less keen to lend than they were at the end of last year.

Will these conditions last? Obviously that is the $64,000 question and one I wish I knew the answer to with absolute certainty! I suspect the market will improve into and through winter as the excess stock is mopped up, and will again be swamped in late spring / summer.  I also think lending conditions should ease in the new financial year. So what would I be doing if I wanted to sell – I think pricing competitively is a great strategy at the moment – buyers hate the lack of prices with auctions, and well priced property will always catch the eye and attract offers.

March 04 2010 | Buyers and Home Sellers and Buyers Guides and Sellers and The Market | No Comments »

Property, Property, Property, The Market Is So Confused!

The Breaking News story today is about property again. Seems like lately everything is about property property property. Today’s headline states Property sales plunge in January – January house sales worst in nearly two decades…

Sounds terrible doesn’t it! This story is quite a different picture that was being painted last month when the authorities were talking about the market in December. It is clear that there is a huge amount of instability within the market place. People are unsure what exactly is going to happen and the media is always reporting on the has been or the statistics. Here are some of the facts relating to the latest data that has been released.

• Home sales plummeted in January to their lowest level in nearly two decades

• January saw just 10,272 new listings coming onto the market; the first time in 4 years that the January figure has been lower than December

• T
  

  he total figure of 3,666 dwellings sold in January this year was the lowest monthly total since electronic records began in 1992 and was only the second time the total figure had dipped under 4,000.

• The national median of $350,000 was up 7.7 per cent on the corresponding figure of $325,000 for January 2009, but was $10,000 down on the median price for December 2009.

• The national median for days to sell in January was 43, 16 fewer days than the corresponding period a year ago but 10 more days than in December 2009. Sales were quickest in Southland at
  

  33 median days and in Auckland where the median days to sell was 36.

So why the big change between December and January when January is typically the busiest month for Real Estate transactions in New Zealand. SO what is holding it up. The answer isn’t as simple as one answer. There are many reasons. Some of these include the recent news about the possibility of tax reforms relating to property, some factors include New Zealand heightening unemployment ratio, other things such as the media releases stating that house prices are at levels not seen since the 2007 peak.

I think all these factors have put the brakes on people making decisions relating to property. Naturally because property is a massive investment people don’t want to be making investments when there is uncertainty around it.

The next step in the equation is almost anybody’s guess. There are no hard and fast rules. When it comes to property investment it would be fair to say that many people will be holding off, including myself until it is clear what the government is going to do regarding the tax reforms relating to property and gst. The recent Speech done by the prime minister will have adverse effects on peoples perceptions of residential property

investment. This is the key part to the speech.

It will be a long awaited Budget in May and I can’t wait to see what it produces. There will be big change and until then unfortunately I feel the property market might be quite subdued because many investors will be holding off buying. But on the flip side to this with a relatively higher property inventory compared to the number of sales there could be some great buying opportunities for people who wish to buy their own home as some vendors could become pressured due to the lack of interest in the market.

There is also one other point to take into consideration which could cause all of what I have said above to be a uncredible. Since the Real Estate act changed in 2009 agencies do not need to be members of the REINZ who usually supply all the stats for the sales etc. SO just possibly maybe there is a slight problem with the stats from here on in and the real estate stats are not up to date. This could be the case because agencies do not have to submit their results to the REINZ. This would cause a dip in the stats if someone didnt enter their data. this is something I will investigate further.

This is surely interesting times.

If you want to view the entire John Key speech visit this link to download a copy of it.

February 12 2010 | The Market | 4 Comments »

Mortgagee Sales… Money Is Still Tight

Mortgagee Sales now account for 4% of all house sales. This is a disturbing statistics. It is horrifying to think that 1 in 25 houses selling on the market today are mortgagee sales. For statistics

Regional towns across New Zealand are feeling the squeeze as mortgagee sales hit another historic high in September, according to the latest figures from Terralink International.

The data released today showed 343 registered mortgagee sales – up on the previous record number of 321 in July this year.

September 2009’s figures are up 130 per cent from the 149 mortgagee sales recorded in September 2008.

In September 2007, prior to the recession, there were 16 mortgagee sales.

Terralink Managing Director Mike Donald said the new record figures followed an uncharacteristic dip in mortgagee sales the month before.

“The continuing increase in mortgagee sales came as no surprise because all indicators showed the worst was not over for property owners. I don’t think we’ll see a true decline until sometime next year,” he said.

Regional towns and cities showed the greatest increases in mortgagee sales, Mr Donald added.

The number of mortgagee sales in Manawatu has doubled in a month from 11 to 22, Hawke’s Bay has gone from 15 to 24 and there were 32 mortgagee sales in the Waikato region in September, up from 18 the month before.

Northland, Otago and the Bay of Plenty also saw significant increases.

“The recession isn’t just hurting people in the big cities, small town New Zealand is clearly hurting too,” Mr Donald said.

Christchurch was the hardest hit main city, up from 19 mortgagee sales in August, to 29 in September.

figure source: NZ Herald

As I see it now there is no logical reason as to why house prices in New Zealand haven’t yet crashed in a dramatic way like the rest of the world. Not only is farming bad but tourism is terrible. Mortgagee sales and mortgagee auctions have risen 100% in Northland from May 2008 to May 2009, In Auckland during the same period, they rose 211% and in Wellington 1000%

This begs me to ask why are people getting themselves into the hassle of mortgagee sales but unfortunately its just about people not taking the right measures to avoid it. But I still receive emails from people asking why do people get themselves into this situation and others asking what actually happens in a mortgagee sale. So here is a quick excert from a New Zealand Website that details what a mortgagee sale is…

So what happens at a mortgagee sale?

A mortgagee sale is the final stage of the mortgagee process, at which the property which is the subject of the mortgagee action is sold at public auction to the highest bidder. The sale is conducted by a court-appointed referee. The referee commences the sale by reading aloud the Terms of Sale; the Terms of Sale is the document that acts as the contract of sale between the referee and the high bidder, and sets forth the rights, responsibilities and obligations of both the referee and the high bidder. Once the referee has read the Terms of Sale, the referee begins to accept bids for the property. The foreclosing mortgage holder (the “Mortgagee”) usually has an “upset price” which is the minimum amount it will accept in satisfaction of the mortgage debt. If the highest amount bid is less than the upset price, the Mortgagee will usually be the high bidder and take title to the property. If, however, the highest amount bid exceeds the upset price, the property will generally be sold to the highest bidder.

How does this happen?

If you fail to make the payments due under a mortgage on your home, the lender (the “mortgagee”) has the right to recoup the loan amount through exercising the powers contained in the mortgage contract. Usually this is done through the power to sell the property.

The mortgagee must, however, fulfil certain strict legal requirements, including serving you (the “mortgagor”) with the proper notice. If these requirements aren’t met then you may be able to apply to the court for a remedy.

Mortgagee must serve you with notice before taking action

Before taking action the mortgagee must serve you with a notice under section 92 of the PROPERTY LAW ACT 1952. This notice must adequately inform you of:

• the nature and extent of the default complained of (that is, the amount by which you are in default)
• the date by which you must remedy the default
• the rights that the mortgagee is entitled to exercise if you don’t remedy the default by the specified date

The date specified must be at least four weeks from the date on which the notice is given. But if the mortgage contract specifies a period for this that is longer than four weeks, the date specified in the notice cannot be earlier than the end of that longer period.

If you receive a notice from your mortgagee that does not comply with the legal requirements, you may be able to apply to the court for an injunction to prevent the sale going ahead. Further, if the mortgagee exercises the power of sale before the date specified in the notice, you may also be able to apply to the court for a remedy.

The mortgagee’s duty to obtain the best price

The mortgagee has a statutory duty to take reasonable care to obtain the best price reasonably obtainable as at the time of sale. If the mortgagee breaches this duty, you can apply to the court for a remedy.

To satisfy the duty the mortgagee must adequately market the property, which may involve advertising outside the local area, giving notice of the property’s advantages (including the potential for any development), and setting a realistic reserve price based on the property’s valuation.

Three ways of exercising the power of sale

The mortgagee can exercise the power of sale in one of three ways:

• sale through the High Court Registrar
• sale through public auction
• a private sale

Sale through the Registrar

If the mortgagee chooses to exercise its power of sale through the High Court Registrar, it must apply to the Registrar and notify the Registrar of the name and address of the mortgagor and of any other mortgagee. The Registrar must be satisfied that the mortgagee is entitled to exercise its power of sale.

A mortgagee is entitled to buy the mortgaged property only if the sale is conducted through the Registrar.

Your right to redeem the property

There is a small degree of protection afforded to you, the mortgagor, through the “redemption price” – this is the price at which you may redeem the land to be sold. At any time before the Registrar’s sale you may pay the redemption price or the amount due and owing under the mortgage; the mortgagee must then release the mortgage.

The redemption price is set by the mortgagee, and must be specified in the mortgagee’s application to the Registrar to conduct the sale. Any advertisement for the mortgagee sale must state that the redemption price is available at the Registrar’s office and can be obtained before the auction.

The best thing to do is talk to your lender and your solicitor early to avoid heartache.

The reality is that real people are having mortgagee sales. Its as easy as a person losing their job. For example a friend of mine lost his job, have a mortgage holiday but his new job did not give him enough money to pay the mortgage. He then was notified that his home was going to be sold and there was not much he could do. This is very real and looking at the economic situation out there there will not be a sudden drop off from these types of sales.

November 22 2009 | Sellers and The Market | 4 Comments »

Christchurch Real Estate MArket Looks To Be Bouncing Back

Christhchurch Property Trends
Property values in Christchurch declined by 1.9% over the past year (calculated over the three months ending August 2009 in comparison to the same period last year), a substantial improvement on the 5.5% annual decline reported in July. The average sale price for the city increased slightly from to $342,993 to $344,401. Values in Christchurch are down 7.6% since the market peak.

The figures are showing a fifth consecutive month of recovery in Christchurch’s residential property market, indicating a period of consolidation heading toward the summer months. These numbers still need to be treated with caution however.

Suburban Christchurch has held well, with all suburbs showing an improvement year-on-year. The market is showing clear segmentation with the level of activity strongest in the under $350,000 market, closely followed by the $350,000 to $500,000 price range. Local agents report a shortage of listings which is putting pressure on properties currently on the market and consequently we are a seeing healthy sale prices. The auction process also appears to be providing strong results. However, I am fairly confident that this represents a small bubble in the market and is nothing more than a volume-related issue for the short term

QV expect to see things soften slightly as the spring and summer months bring more listings to the market. Overall there has been an improvement in market sentiment, although buyer behaviour is still cautionary with job security and the ability to service debt being key factors for some folks at present. Looking forward we anticipate a more traditional spring and summer market

From where I sit I can see the market seems to be in a very edgy state. There is definitely a fair bit of movement happening and plenty of buyers out there wanting to lock into the market when there is cheaper money available and lower prices of houses compared to the prices 2 years ago. Bt how long do you think this seriously will last for.]

Take a deep breath. Look at the fact that the OCR is not going to stay low. The cost of borrowing isn’t getting any cheaper any more, household debt is still high. There is increasing pressure being put on the export market because of the high kiwi dollar and there are many other factors that mean that the housing market potentially has a lot to worry about

If you lock in now I feel that you will be safe from the harder times that may be ahead. But if you wait too long it will be harder and this will price the first home buyers out of the market. When the first home buyers become priced out of the market there will be problems with the economy. This will mean that older people are going to be the home owners of the future and the people migrating to New Zealand will also benefit, but the dollar will hinder that as well.

There is too much uncertainty out there at the moment to say that a rebound is happening. If you look at the facts it is clear to see that the sales volume is increasing and that the median is on the way up. But be cautious about the future woes that lie around the corner. If you want to act do it sooner rather than later.

September 15 2009 | The Market | No Comments »

Unemployment And The Real Estate Industry

There have been many reports recently stating that “experts” are seeing a turnaround in several segments of both the commercial and residential real estate markets here in New Zealand. But I find it hard to see this and put credibility on these reports. I justify this by saying there is no other crux that is more closely tied to the fundamentals of real estate than employment and there is no indication that we are close to seeing a peak in unemployment.

I say this because yesterday I had to do something I am really not proud of but I had to seek some financial assistance to get me through the times that most of us are experiencing. During the time I was at the IRD and other various offices talking to people there was a very clear trend happening. There is very little work out there and there are a lot of people seeking the same advise and help I was asking for. My bank manager told me that there were hundreds of people just from our branch on a 3 month mortgage holiday at the moment. Let’s hope those people can keep their homes once they come off.

We are presently at an unemployment rate of 5% nationally and economists estimate that there will be a peak of 9%-10% to as much as 11% before the trend reverses.

The national unemployment rate of 5% from the March quarter 2009 is a result of employers cutting more jobs to counter the lower sales and revenue being generated. This is the highest unemployment rate that this nation has seen since late 2003.  There have been a huge amount of jobs lost in the last 12 months and it’s not looking to stop.

Redundancy or job loss seriously impacts upon a families ability to meet their financial obligations. Buying food, paying utility bills, covering personal debt and making mortgage repayments represents a real and lasting challenge for those that don’t have adequate unemployment insurance in place.

People that were struggling with debt when they were in work are unlikely to find that losing their job helps their plight. The lack of a regular income also means that negotiating a suitable monthly repayment figure with creditors is vastly more difficult for cash-strapped families. Some debt solutions are also no longer available for struggling families.

Rising unemployment doesn’t just affect those that have lost their job, it also affects peoples’ ability to negotiate wages or secure a better employment package when they find a new job. Those that are actually in work fear for their own job security; employers realise that the bargaining power of their employees’ is reduced and are better placed to control wage inflation.

Since the start of the recession, redundancies and job cuts been lost across many sectors from retail to manufacturing, but the hardest hit industries for job loss has been finance, construction, tourism and real estate agents.

The effects of the credit crunch are flowing through to the real economy in New Zealand NOW and this meant 1000 people a week were signing up for the unemployment benefit, half of them in Auckland.

As unemployment rises, people who have either lost their job or fear losing their job do not move to a larger rental apartment and do not move from a rental unit to purchase a residence whether it is a single family home, or a matured family or an individual. People tend to stay at home longer and save money in a recession. People tend not to move around and spend money moving unnecessarily. This is one of the big reasons we are seeing a housing shortage in some areas of the country.

There are still buyers out there wanting to buy. Not in huge numbers but just enough to keep agents busy. But as I just said there is a shortage of houses for sale. It is easy to see how the fundamentals of Real Estate are tied into the unemployment ratio. As we see higher unemployment in New Zealand over this recession and winter we will see a slow Real Estate Market with both slow sales and possibly decreasing values as mortgage sales and desperate sellers compete.

June 23 2009 | The Market | 2 Comments »

June 2009 – OCR remains bottomed out at 2.5% – Is This The Turning Point?

The New Zealand economy has been on a downward spiral along with global economies since 2007. Butmany believe that we in New Zealand have reached a turning point. In terms of New Zealands Official Cash Rate I believe we have hit the bottom of the line. It started in June last year when the Official Cash Rate stood at a record high of 8.25 per cent. Floating mortgage rates were nearly 11 per cent and savers were getting more than 8 per cent for the money in their term deposits.

In 2007 the world hit a point when the credit crunch hit and people were just struggling to pay the high costs and banks and finance companies started folding. This sparked the Reserve Bank on the fastest and biggest series of cuts in the OCR in history. The degree of OCR cut has been one of the largest drops in the World. The OCR here has been reduced 6.25% from 8.75% to 2.5% in just over 18 months.

This for the housing market helped the banks bring their interest rates down to record lows as well. But this is going to change Interest rates will be going up over the next few months (irrespective of what the RBNZ does with the OCR) as simple supply shortages and excess demand from governments increase the price of money. Two to five year rates will be the biggest rises, but I’d expect short term and variable rates to see some upside movement too.

Any of us who are struggling to meet debt repayments, or who consider they might be, or indeed who feels their employment might be at risk should quickly start liquidating assets and clearing debt NOW ahead of the rush.

So as far as OCR rates are concerned this is the end of the line. There will not likely to be any further cuts to the OCR but there will probably not be any increase in the OCR until well into 2010 when the economy starts a slow recovery.

June 13 2009 | The Market | Comments Off

Christchurch QV May Statistics With New Zealand Market Comment

Christhchurch Property Trends

Property values in Christchurch declined by 8.1% over the past year (calculated over the three months ending May 2009 in comparison to the same period last year), an improvement on the 9.6% annual decline reported in April. The average sale price for the city decreased slightly from $342,929 to $339,695.

These annual numbers need to be treated with caution, as the same period last year was a time of decline, measured against the month ending May 2009 which shows a period of flattening. So by default the numbers will show a recovery.  It is a positive sign as far as market sentiment goes, but it is still too early to tell whether this 3-month stabilisation is the start of an extended levelling-off period. The small decrease in the average sale price is easily skewed by the mix of property being sold, so although this has limited value, it does reinforce a flattening in the market.

Suburban Christchurch has held well, with the central, northern, eastern and hill suburbs all showing an ease in the rate of annual decline. The central and northern suburbs are showing the largest recovery of 2.7 per cent” Mrs. Swallow said.

Mrs. Swallow of QV says “Anecdotal evidence from different market segments suggests the level of activity to be strong under $350,000, which typically represents the entry-level and investor part of the market. This is followed closely by the $350,000 to $600,000 market segment, which generally represents the next step up the property ladder for most people. The market segment of properties priced over $600,000 appears to have the least amount of activity. Again, this needs to be kept in context as it represents a much smaller part of the market overall. Properties over $1,000,000 are very slow to sell in Canterbury at present”

It seems as though job security is still the key driver behind purchase decisions at present. This lack of security, coupled with the normal seasonal variation, means we expect to see a continuing pattern of consolidation over the winter period

Property values continue to stabilise

The QV national residential property indices for May showed an 8.1 per cent decline in property values over the last year, a considerable improvement on the 9.2 per cent decline reported last month. This is the second month in a row where the year on year change has improved.

This improvement is due to continued stabilisation of property values in recent months, and contrasts significantly to a market that was declining sharply twelve months ago.

This latest trend as I pointed out in my last blog post is unlikely to continue. So if you need to sell, sell now!

Auckland Region -7.6% $483,397 Hamilton -7.5% $346,274 New Plymouth -5.4% $319,073 Palmerston Nth -8.9% $274,418 Christchurch -8.1% $339,695 Queenstown -8.4% $600,414 Invercargill -10.3% $205,552				Whangarei -12.8% $327,073 Tauranga -9.4% $425,621 Rotorua -9.5% $267,342 Napier -8.9% $311,373 Hastings -9.7% $295,508 Wellington Rgn -7.4% $424,411 Nelson -6.7% $333,812 Dunedin -5.4% $264,180
		New Zealand -8.1% $371,555 Annual Property Value Change Average Sales Price

source QV

What is the Market Doing Now?

The last property slump was in the early 90’s and in that time New Zealand experienced a mass exodus with immigration figures at one stage peaking at close to 40,000 (decrease) in a 12 month period. This created a surplus of housing and resulted in subdued sales and lower prices. At least through this recession migration figures have stayed in the positive. The lowest point was in February 2008 recording a net increase of 4600 over a 12 month period. Figures from Statistics NZ show seasonally adjusted net migration rose to 2,030 in April from 1,690 in March and is running at 9200 over the past 12 months. So with net migration figures in the positive, and still growing, it will only be a matter of time before this influx creates buyer demand and turns the property market from a “buyers” market to a “sellers” market.

Interest Rates – They are on the move so be prepared to act fast.

Longer term interest rates are still continuing to rise. This is a bit of a concern and disappointing for those who like to lock in long term. However the short term rates are very attractive and offer some significant savings. I wouldn’t expect to see any significant reduction in long term rates as the market is pricing in at the higher levels now. With the enormous amount of “money printing” by Governments around the world the next problem will be inflation. And that means higher interest rates. So fixing at 7.5% now may actually seem cheap in 2 or 3 years time as interest rates may escalate. Clients who have fixed for 4 or 5 years over the past 6 months will be on a winner if this eventuates. Whether you fix short or long will depend on your situation and strategy so don’t hesitate to call if you want some advice in regards to your situation.

Current interest rates

6month 5.45

1yr 5.50

2yr 6.25

3yr 6.99

4yr 7.50

5yr 7.99

June 11 2009 | The Market | 4 Comments »

Do You Actually Believe We Have Hit The Bottom Of The Market?

Well if you do I believe your being naive. There has been in the months of late a definite pick up in the market especially in the terms of sales volume which one could almost think that a bounce back is happening. There has been great activity, a lot of sales and new buyers emerging from the dark places in the economy. And they have all had good merit.

With the lowest interest rates in decades and coupled with dropping values in property all around New Zealand – buying a house has become a heck of a lot more affordable for many many people and this has sparked a few people to take action and buy a home. And to be honest it isn’t a bad time to buy a home for yourself because if you are buying for yourself in many places this option is cheaper than renting.

But in terms of the market being at the bottom I do not believe it’s there yet. There are many factors that conclude to me thinking this and I don’t share this view alone.

As we all know the Governments annual budget was delivered and our treasury are spelling out that they do not expect the housing market to pick up and expect property values continue to drop. The treasury say that house prices are forecast to decline nearly 8 per cent in the year to March 2010 and a further 4 per cent in the year to March 2011. They are already down an annual 9 per cent.

The drop will be attributed to the rising unemployment rates which is tipped to be upwards of 9% by 2010. The Treasury also forecast low levels of investment in property and noted annual building consents were at their lowest in over 25 years.

Westpac economists are also warning the pick-up in the housing market is unlikely to last. Chief economist Brendan O’Donovan and research economist Dominick Stephens predicted low sales volumes and gentle price declines in the second half of this year.

Prices would start falling again soon for the simple reason that longer term mortgage rates had risen sharply since March. They forecast house prices to fall 5 – 7 per cent during the next 18 months, with variations from that mostly determined by interest rates.

“Lower mortgage rates sparked the market revival, and higher rates will extinguish it.”

The big trend that is being picked is that mortgage rates were likely to continue weighing on the market for the next few years. Short term rates might fall, but only temporarily, while long term rates were more likely to rise. This alone is going to really hurt as money becomes tighter especially over this winter where rising unemployment, and continuing tight credit conditions will catch people out by surprise.

Indications of the improvement in the housing market so far this year included a 74 per cent rise in seasonally adjusted house sales in five months, from rock-bottom to roughly average. This has been attributed to continuing strong net migration because of even worse conditions overseas in some countries. This trend here has also seen the number of days to sell a house had fallen back to 2007 levels, while the number of available listings in has started to fall.

My word advice for the time being is just to be careful when it comes to buying property at the moment. You need to think of property at the moment as a long term investment. Not something you could renovate and make a bit of money from.

June 05 2009 | The Market | 4 Comments »

The State of Real Estate Around the World: No Signs of Stabilization

Our Housing marketis in worse shape than Australia’s but is also likely to avoid as deep a correction as in the U.S. and Europe. The Reserve Bank of New Zealand has cut 575bp since July 2008 to 2.5% in April 2009 but longer-term, fixed mortgage rates have recently begun to rise again due to expectations of a quick recovery and higher interest rates. Fiscal policy has been laissez-faire towards the recession, opting merely for tax cuts as the government would rather not stand in the way of the economy’s structural adjustment. With housing assets 5.7 times the household disposable income, New Zealand property markets are even more leveraged than their U.S. counterparts.

House prices fell 8% in 2008 and are down 9.2% y/y as of April 2009. Some analysts believe the housing market will bottom on an annual basis in 2009. The housing market has already bottomed on a month-over-month basis, with the median price rising from $325,000 in January 2009 to $340,000 in April.

Immigration has revived housing demand and sales have been strongest in the low-end segment thanks to increased affordability. However, new building starts and new home sales remain below the boom levels of 2004 and will likely remain so due to credit constraints, rising unemployment and sluggish economic growth in the year ahead.

To have a detailed look at what has been said about the rest of the world and the state of their housing markets visit this site.

Source: RGE

May 28 2009 | The Market | No Comments »

Has The Recession Hit!

I am not going to harp on about any statistics or any comments made by the so called experts. All I would like to see here is a real discussion on what you actually think and what your actually seeing out there on the streets. For several months now I have speaking directly to business owners and I have seen a very clear trend with most of them. The exceptions being liquor stores and video stores .I will explain soon.

In my time speaking to businesses there has been a very downward spiral in their sales. Since Easter there has been a drop off to very slim pickings in terms of sales. I have even noticed this within the business I have been working where I have noticed sales drop to half of what they were 4 months ago and we haven’t been alone in this. I have had almost all of the 400 businesses I am dealing with say the same thing except for those exceptions I said before.

You don’t have to be a rocket scientist to think that its hard out there now. Just drive down the main street of Christchurch or any City in New Zealand and see how many businesses are closed down and how many shops are closed.

Is winter going to be a downturn in the masses where we see much more the redundancies that we are already seeing. From what I see most business owners have less money. The waged people are safe until their employer can’t pay them anymore which is seeing most keep their hands in their pocket when it comes to spending and only spend limited amounts when they need to. This is why the liquor stores and video stores seem to be doing well as people must be staying home drinking and entertaining.

In your observation what are you seeing. Have you been in or are you in a situation that is causing you to budget. Please leave comments, let us know what’s happening out there on the ground.

May 13 2009 | The Market | 1 Comment »

Reserve Bank Of New Zealand Lowers OCR To 2.5% April 30 2009

New Zealands Official Cash Rate has been cut again to 2.5% which is a further sign that the Reserve Bank is trying to stimulate the economy. Dr Alan Bollard this morning said to the people that he sees the Official Cash Rate being low for around the next 18 months as the economy is finding its place and evening out.

Bollard says “We expect to keep the OCR at or below the current level through until the latter part of 2010. The OCR could still move modestly lower over the coming quarters,” he went on to say; “The world economy deteriorated further than expected in the first quarter of 2009. While monetary and fiscal policy responses in many countries have been substantial and there are some signs of stabilisation in some countries, we still expect the adverse economic forces generated by the crisis to remain dominant throughout 2009. The timing and extent of global recovery remain highly uncertain.”

The OCR is the lowest it has been for 10 years and is now at a record low for New Zealand. Bollard wants to see banks passing on this cut to the consumer. The last OCR cut saw an increase in the 5 year interest rates which didnt impress many of the NEw Zealand public but due to the high cost of borrowing from overseas the banks couldnt sustain the low rate on the 5 year loans. To the right is the graph of the OCR trend in the previous 5 years; picture supplied by Christoph Lukasser

Westpac Bank has moved quickly in response to the OCR cut, saying it was cutting its 6 month home loan rates by 0.4 per cent. This brings its 6 month home loan rate to 5.39 per cent, due to come into effect this Friday. As with most times when the OCR is cut our New Zealand Dollar dropped again this time The New Zealand dollar plunged nearly 1cagainst the American Dollar from US57.34c to US$56.46c

Bollard went on to give a little optimism to the markets by saying; “We expect the large decline in the OCR over the past year to pass through to more borrowers over coming quarters as existing fixed-rate mortgages come up for re-pricing. This, together with the stimulus from fiscal policy, will act to support the New Zealand economy and eventually see activity trough and pick up thereafter. However, the scale of the global financial crisis and domestic adjustments underway are such that it is likely to be some time before economic activity returns to robust and healthy levels.”

In my view there is still a long bumpy road ahead for the economy in New Zealand and around the world. The Swine Flu has not helped matters at all with already Pork exports stopped, tourists from around the world cancelling their trips and New Zealanders deciding not to travel abroad. This will cause the econonomy to retract even further than it already has and with winter on its way will hurt many businesses in the pocket. With Bollard saying the OCR will stay low for around 18 months will give businesses and people confidence of knowing what levels to look forward into, espessially over the summer of 09/10 where many businesses including mine are going to have to plan ahead for and try and grow.

It will be rather interesting to see how the New Zealand economy is going to fear in the next 6 months over the winter period with all the things happenoing in the world at the moment. What do you feel will happen?

April 30 2009 | Buyers and The Market | 1 Comment »

March 2009 QV Statistics And New Zealands Housing Sales Volume

Christchurch

This is the latest Press Release from QV.

Property values in Christchurch decreased by 9.7% over the last year (calculated over the three months ending March 2009 in comparison to the same period last year), deteriorating further from the 9.1% annual decline reported in February. The average sale price for the city increased slightly from $344,816 to $349,442.

Melanie Holcroft of QV Valuations said; “The Central and Northern suburbs are holding as the strongest areas of Christchurch City, with the Eastern suburbs mirroring the Canterbury market.  The Hill suburbs have decreased from -8.1% in February 2009 to -9.9% in March 2009. The upper end of the market seems to be experiencing less activity compared to the middle and lower sections”.

“Property values since December 2008 continue to decline, although this appears to be at a slowing rate. Whilst the average sale price for Christchurch City shows a small lift, it must be kept in context as this data is easily skewed by normal market fluctuations and the mix of property being sold,” she said.

“The anecdotal signs of increased market activity with properties that are well priced continue on from last month, and buyers are showing plenty of interest in these. It should be noted however that the overall sentiment is still cautionary, with job security appearing to be the key driver affecting purchasing decisions. Local banks are also reporting a noticeable increase in pre-approvals, but this is still slow to filter through into market activity. We anticipate a slower market over the winter months, with current trends in line with seasonal behaviour,”Holcroft said.

Here is a snap shot of New Zealands Median Price for Property over the past 9 years.

Now here is the median for the same 9 year period in Christchurch.

The trend is very much the same.

Now the big change that agents have noticed is the drop in sales volume. Here is a graph from treasury that shows the drop in sales volume over the last two years and how it has changed.

As you can see there is a huge drop of with sales volume at about the time of the housing crisis in The United States which has evolved to the global credit crunch. But on the other side of this look at how steep the sales volume grew. This is post the 9/11 Twin Tower events which saw the number of migration of ex pats and new people to New Zealand grow at very fast rates as the graph below shows.

Now whether 9/11 was hoaxed by the Illuminati in a bid to change the world and protect certain people wealth or it was a real act of terrorism are still up for debate but the after effects have been more than anyone can detest. The jobs and employment from the upbeating of security was massive and in New Zealand the return home of thousands of New Zealanders pumped billions into the economy. But this caused the bubble that just kept getting bigger and bigger and created more and more debt. This debt is the real reason for the market the way it is. Now we have inflated prices with less capital and the same amount of debt.

When will the housing market start to move again.

Signs are already of more activity and there is a clear sign of migration numbers increasing as more people return home. These people have to live somewhere.

April 25 2009 | Buyers and Sellers and The Market | 1 Comment »

Renting vs Buying – A Personal Perspective

Many people wonder whether renting or buying a home is better decision. Most of the time, history has shown it is a smarter financial move to purchase a home than to rent.  The final decision is unique to each situation of course. Here are a few points to note about both renting and buying.

 Buying

• May require a larger initial investment – the deposit (usually a mortgage is 20% of the sale price)
• You must be responsible for all upkeep otherwise value is affected
• If you want to move, your home generally must be sold
• Equity may go up, down, or stay stagnant depending on the home’s value
• Over time, the mortgage balance decreases and equity builds
• The ability to remodel and redecorate the home to match your needs and desires
• There can be tax advantages attached to home ownership

Renting

• Smaller amount of “up-front” cash
• When the lease is up, you can just move
• Costs for the term of the lease are more fixed
• Not gaining equity, but not losing it either
• Generally less work in maintaining a home or apartment
• Even if the property goes up in value, you will never gain equity
• Limitations on what you can do to “make it your own”
• No tax advantage to renting

Today we live in a more transient society. People move around a lot more with their jobs, are getting married later and want more flexibility with their living arrangements. There also doesn’t seem to be as much emphasis placed on the importance of having your own home.  Long term renting is becoming more and more common. A concerning reason for this trend is that it is becoming increasingly difficult to afford to buy a home, firstly save for the deposit and secondly be able to afford the mortgage repayments, especially in the major cities and more highly desirable and expensive areas. Housing affordability has increased from 2.1 times the average income to over 5 times the average income over the last couple of decades.

Under the cureent economic situation I have myself looked into buying another home. But for myself I cant get conventionally a 20% deposit as the eqity in my first home has fallen below the loan amount which I know has happened to many many people out there. Although this is not a problem for me bcause I do not intend to sell. The rent covers the mortgage payments and it works for me. But due to this I cant get another loan for another home to live in in Christchurch. So I have been forced with renting.

What I have found though is for my situation renting may not be the worst thing for me to do at the moment because housing prices are surely to come down further as this year unemployment and money problems worsen in this country. In saying that there has been some hugely increased sales volumes as of late. I am putting this down to the low interest rates where hungry cash ready investors see some good buys out there at a good interest rate. An investor friend of mine told me they were not worried if the price of the property dropped another 10% in value over the next year. They can see good returns at the current prices and the current interest rates to make it work. They also went on to say which is correct that the rice of property will go up again. A recession doesnt last forever.

If you are in my situation and find yourself unable to buy at the moment a house whether its your first or second or what and you find yourself haing to rent the best thing I think to do at the moment is find a relatively good priced property and cut your expenses down and save for a while. I believe the current cycle of good buying will not be over for some time. So if you sit down now and save you might be able to buy again when the horse is about to take off again. Thats what I am doing

April 19 2009 | Buyers and The Market | 1 Comment »

Westpac The First New Zealand Bank To Give New Zealanders A Mortgage Holiday

Finally there seems to be a little relief for those who are becoming financially stressed by this global economic downturn. Westpac is the first bank in New Zealand to follow Australia’s lead and offer 12-month mortgage holidays.The decision is part of the bank’s new set of measures to help financially stressed customers. Australia’s biggest banks are offering customers a 12-month holiday after pressure from their Prime Minister Kevin Rudd to go easy on those who had lost jobs and were struggling to pay their mortgage.

Prime Minister John Key said he welcomed the positive step to help those New Zealanders who had lost their jobs and still had to service their mortgage. Westpac New Zealand discussed its proposals with Mr Key before announcing it would offer customers new options of interest-only repayments and to extend the period of loan contracts.

But while many customers will welcome the new offers, Westpac acknowledged that postponing loan payments for any period would increase debt, and therefore may not be suitable for many borrowers. Mortgage holidays are nothing new. They have been around for some time and under special circumstances the banks usually will allow you to ask and try for one. But now the recent announcement is a step forward for people who are struggling a little more than they could have before. Its a step to helping people keep their homes in my view.

There are inherent dangers of mortgage holidays – for like all holidays they ultimately have to be paid for and would be careful in the way it applied the options.

Taking a holiday from your mortgage repayments certainly gives you a breather for a few months if that keeping that roof aloft begins to look a bit precarious, but to ensure your next intake of breath isn’t a sharp one, beware of the pitfalls. Missing payments can have a huge impact on future payments and the size of you overall mortgage.

Here’s what will happen to say myself in this situation;

• Taking just one year’s mortgage payment holiday.
• The price of the home dropping in value by 10 percent.

CASE STUDY

My house is worth $300,000 in todays market. My mortgage loan is for $270,000. So, I own 10 percent of my home at the moment. In one year, the 10 percent estimated drop means my home will be worth $270,000 the amount of my loan. If I add on the $15,000 I plan to defer on the mortgage that then means I owe $285,000 on the mortgage, but the home is now only worth $270,000 and I will owe $285,000 so that means I will have negative equity in the home. Meaning I will owe more on their home that it’s actually worth. This isn’s a problem if I don’t intend to sell but I probably wouldn’t be able to remortgage in future untill I get some equity in the home.

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It sounds like a really terrible situation and sounds daunting and you have to look at both sides of the fence when thinking of taking the holiday. The most important action that can be taken in times of hardship is for you to talk with their bank early so that if you are in trouble the bank can help you make the best descision for your current financial situation.

April 11 2009 | Sellers and The Market | No Comments »