Latest QV Figures Are Confirms a Continuing Trend

This is an update from QV for the month of January.

From where I was on the ground there seemed to be alot of positives and enthusiasm as the interest rates have come back to record lows and this coupled by the drop in prices making housing affordability more realistic than it has been for many years. Although with the tightened up criteria the banks have been excersing it is making it hard for investors and first home buyers to stay or enter into the market. The fact of the matter is that prices are expected to drop further, sales volume isnt expected to rise by much but interest rates will drop further as the RBNZ tries to stimulate the markets. But there still is very much alot of uncertainty within the market. There are some that see that there are opportunities out there to make positive cashflow out of investments where others think that the market still has to much recovery to go before it will be viable to make any commitments. 

My opinion is that prices will continue to fall for most of this year. I feel the mortgagee market is going fuel this downward spiral into proabably the third quarter. This doesnt mean that opportunities are out there because they are and are waiting for any one of us to snap up, and generally they are pretty quickly. If you want some more reason to think why property prices may drop have a look at the housing affordability post on here. As with any market or situation its what you make of it. Here is what the official word is from QV..

Christhchurch Property Trends

Property values in Christchurch decreased by 8.8% over the last year (calculated over the three months ending January 2009 in comparison to the same period last year), deteriorating further from the 8.0% annual decline reported in December 2008. The average sale price for the city decreased slightly from $348,953 to $347,157.

Melanie Holcroft of QV Valuations said; “The change in property values experienced between October and December 2008 showed that the rapid decline could be easing, but these latest figures show that the situation is still worsening. Average sales prices continue to decline; this could be influenced by low sales volumes and the mix of property being sold.”

“There have been anecdotal signs of an increase in investor activity, driven by decreasing property prices and lower mortgage interest rates. In short, if consumers have the equity or available funding it appears to be a good time to buy residential investment property” Ms Holcroft said.

“Overall the market has continued to soften, but at a slowing rate on those levels experienced in mid 2008. Lower interest rates have been slow to stimulate market activity, a pattern usually observed.  This is attributable to a decrease in confidence in the employment market and rising food and fuel prices. We expect this pattern to continue for the next quarter” said Ms Holcroft.

		CHRISTCHURCH
Waimakariri -7.1% $310,683   Southwest -8.9% $324,962   Selwyn -8.0% $360,820				East -8.6% $279,214   Central & North -8.5% $410,849   Hills -9.1% $448,679   Banks Peninsula -12.5% *$388,333
		New Zealand -8.3% $382,762     Annual Property Value Change     Average Sales Price

February 12 2009 | The Market | No Comments »

The Property Market in 2008

This is an excert from QV in their montly reports.

2008 has been a pivotal year for the NZ property market with a sustained drop in property values for the first time since 1998.  QV’s December Residential Price Movement report shows property values fell by 7.4% during the year.

“Property values held reasonably flat through the first three months of the year, but the decline kicked in through the autumn and winter months, during which time values dropped 6%.  With the significant drops in interest rates over the past three months, there has been an increase in market activity and values appear to be flattening again” said Mark Dow of QV Valuations.

“To keep 2008 in perspective it’s useful to look back at the activity of the past two decades.  Property values grew by 120% between 2002 and mid 2007. By way of comparison, the last period of sustained growth occurred between late 1992 and the end of 1997 when property values increased by 54%” said Dow.  “After such a period of sustained growth it’s inevitable that we will see a correction.  The question remains how long this period of falling property values will continue.”

“It’s also interesting to look at the types of properties selling at the different stages of the property cycle. Between 2000 and 2003 the number of house sales more than doubled, with a dramatic increase in the proportion of lower value property selling.  In the years 2004 to 2007, the number of house sales remained fairly steady, as did the proportion of low, medium and high value sales.  During 2008, the number of house sales fell dramatically and the proportion of lower value properties selling significantly decreased.  This pattern reflects the wider drivers of the property cycle.  When the economy is strong; job prospects are good and immigration is increasing, then demand for houses, particularly first homes, pushes prices up.  As the economy weakens and affordability becomes a real issue, first home buyers are usually the first to suffer; sales volumes drop and activity in the market moves back to mid to higher end properties as we saw through 2008″ said Dow.

Our December report showed a 7.4% decline over the past year (calculated over the three months ending December 2008 in comparison to the same period last year) while the average New Zealand sale price for December increased slightly to $378,605.

All the main centres showed further declines in property values.  In the Auckland Area values dropped back to -8.0% from the -7.4% reported in November.  Hamilton values fell to -9.3% from -8.5%, Tauranga to -9.0% from -8.4%, and the Wellington Area to -6.9% from the -6.0%.  Christchurch and Dunedin followed the same trend dropping to  8.0% and -7.7% respectively.

Most of the main provincial cities followed the national trend with property values easing further. Whangarei dropped  8.6%, Napier  8.1%, Nelson  7.6%, and Invercargill  9.1%.  However, a number of areas bucked the trend most notably popular summer destinations like Queenstown whose property values dropped to  10.6% from the -12.5% reported in November, and Gisborne to  5.8% from  9.6% last month.
What’s happening in Christchurch?

I dont need to go on any further from this brilliant report that sums up 2008 in a very very good way. The bottom line is if you are selling you need to realise that your house is worth less than it was 1 to 2 years ago. Its a shame but it had to happen. Property prices got to high and you will not see them increase again till a few factors are measured and fixed. These been income levels coming up so that debt can be serviced on mortgage payments and also not until household debt falls.

This year will not be an easy one.

January 15 2009 | The Market | No Comments »

Selling your house in 2009

Marketing, price, presentation

Christmas and New Year is over. We are pretty much now beginning the 2009 year off back into work. I was back at work today to a bombardment of paperwork to be completed. The joys of life. As I said in my previous posts I said 2009 will be a year for change and opportunity. In terms of the change I believe that it will be more important than ever to be at the front edge of what’s happening so you don’t get lost in old ways of technology so that you’re not left behind which could cost you money.

There will be in 2009 a very big change in focus when it comes to marketing. As the credit crunch and the recession take full effect during the early parts of the year there will be a focus to finding more effective ways to market products to reach the audience. And Real Estate will be no different. This to me will be a vitally important key component that is going to become more and more important this year than ever before. Where and How you market your property will be the defining point in the result you achieve when you try selling. Obviously there are other things and I will cover them here as well.

The medians to advertise your property are going to change. In my opinion the need for print media is going to become less and less effective. The cost vs. the result isn’t stacking up any more. Don’t get me wrong that if you put a good sized ad in the news paper you are going to get a lot of local views that day in the paper but it’s a one shot. With the time taking to sell increasing and the attention span of the reader gets smaller due to increased pressures at work and with the family. (Our lives aren’t getting any slower). I think the way to go moving on in the future will be for longer term and specific advertising. This will be online and longer term print media.

When I Say longer term print media I am talking about the local Real Estate book that gets published by either the company or a collective of companies. But I feel that if the company isn’t big enough and doesn’t hold enough listings that if it tries to make a publication of its own for the area it will not get as much coverage. This is only because people these days and I think more towards the future don’t want to have to look all over the place to look at their complete choices. The one stop shop type of model is going to please the consumer of tomorrow.

Realestate.co.nz which is now New Zealand’s leading online Real Estate portal has a dominating effect on Real Estate adverting online. But this is a good thing for the way we as a society want to go. This will enable the public to have the greatest and a more comprehensive search. The reason I say that these sites and publications are going to become more important to your marketing is that people will want to compare your property with what else is on the market. I know people have been doing this for ever but the thing that I think is going to change is that people don’t want to be searching around all over the place to find comparisons. Also with our ever fast passed world you need to be out in the spotlight for longer. This is the reason for the publication with a longer shelf life to be more important in your marketing.

Along with where you market your property in 2009 Price is going to be ever so important. The slow down and recession which started in 2008 and that is now coming with us in 2009 is going to make pricing harder than ever but more important than ever. The thing is that some people will price to the market and some wont. If you are one that hasn’t our going to help the ones who have sell their property.

During the comparing process the buyer goes through your property will simply be eliminated because it’s a higher price compared to what they could buy down the road. I can’t stress this enough. You MUST price the property competitively in today’s market if you want to sell. And you need to advertise that. Be firm on that price but make it known. If you’re going down the track of no priced marketing Auction is the best way to go but make sure you at least have a guideline and listen to the buyers feedback on where they believe the price could be. But be firm on a reasonable value because buyers in a buyer’s market are tough but do listen.

One thing I want to mention on this point is that I know of agents out there actively in the field who are buying listings. Telling the vendor at the point of sale that the property is X amount which is a little more than any other agent you had in has said. This tactic is going to kill your chances of selling and what’s more frustrating is its going become more stressful for you when it seems like your dropping your price constantly because your agent you have chosen says you need to meet the market. 2009 will not be a time to test the market. It’s a time to listen, be aggressive and achieve results.

Presentation is going to be important. When marketing your property online the only guide the buyer has to go by when in the comparison stage is the pictures. Which make having good quality photographs very very important. There are plenty of places to go to have photography done and there will be more I think coming soon to give you a good choice of photographs. But it’s also about the photos that you take. Some agents and people swear by having less photos so that a person enquiring will ring the agent for the enquiry. This is wrong. And even more wrong for a generation Y person. Generally what will happen is that people just want to see everything so that they fully know what to expect. Then they can compare and either eliminate or shortlist the property.

Once the property is shortlisted you then will find the buyer will contact the agent and find out more meaningful and maybe more specific information for their needs. If they don’t contact the agent directly they will go to the open home.  If all the preparation work and everything is done right then you will hopefully get a contract on your property. But everything has to be right. In 2009 there will still be sales and probably more than in 2008 but the properties that sell will be priced right, marketed right and well presented. The combination of these factors and doing them right, especially been proactive about the marketing will ensure that you have a successful sale in 2009.

January 05 2009 | Sellers and The Market | 5 Comments »

New Zealands Household Debt Falls For First Time in 17 Years

Lets start 2009 with a little less bad news from the economys point of view. We are now starting to see some of the effects on the credit crunch and how it is affecting the spending habbits of New Zealanders. In November New Zealand household borrowing fell for the first time in 17 years. This is a direct result of the recession and global market turmoil.

The Reserve Bank of New Zealand said seasonally adjusted total household borrowing fell 0.1 percent to NZ$174.3 billion last month, after a 0.2 percent rise in October. It was the first monthly decrease since the records began in 1991.

This year has seen a marked slowdown with consumer spending falling sharply due to the high interest rates, food and petrol costs increases and a slowing housing market. We have been in a recession since the beginning of the 2008, and many forecasters believe the downturn will continue until the middle of 2009. But all is not bad news from all this slow down. In 2008 alone the Reserve Bank cut the OCR by 325 basis points. And is likely to fall further on January 29th when the RBNZ meet again.

It is interesting to see this data and look at the bigger picture. There is no doubt that 2009 if looking at these statistics will be a slow year for the economy as consumers spend less and have less to spend. 

January 01 2009 | The Market | 1 Comment »

What’s in store for 2009?

What’s in store for 2009.

Seems like everyone is giving their predictions for 2009. It also seems everyone has a different opinion. If you go down the street and ask someone what’s in store for 2009 every single person will give you a different response. Some people are positive, some people are negative. Some have very strong views but one thing I have noticed is there is not many that don’t care. This varied response is actually in my view what’s going to happen in 2009. It’s going to be varied and unpredictable in the whole.

Let’s look at 2008 and what’s been. I am not going to get into this too much because we all know what’s happened. The global credit crunch has hit and it has hit us hard. We started the year on the peak. It was the peak of almost every single market, not just the real estate market. The dollar was high, the stock market was buoyant, petrol prices were well over $2 a litre, house prices had just hit their peak,  but everyone knew that that was the peak by this time. We have been in a year of constant downward trends. Consumer and business confidence has been at an all time low with sales volume and capital have steadily been lower and lower and unemployment levels this year have risen 2%. I know three of my friends who lost their jobs in the last week because of less business turn over.

The global credit crunch started by dodgy subprime loans in the states has had a ripple effect around the world and instantly devalued the price of all the assets we use to trade on. The stock market plummeted, oil prices have fallen 138% this year, our New Zealand dollar went into a free fall loosing almost 35c of the American in less than 2 months. New Zealand’s housing market went into dire straits with sales volume bellying out to levels not seen since 1992 (16 years ago) with only approx 55,000 sales being transacted in 2008. Real Estate prices have fallen by up to 10% – 15%in some areas already from their peak in late 07.

The world reserve banks have slashed the official cash rates all around the world. In the states its now the lowest in history at under .2% and in New Zealand it’s almost the lowest level at 5%. Interest rates on houses have come down a considerable amount.  But the banks are not going to lend on any risk at the moment with most of them putting their minimum deposit amounts up to 20% on all new loans. So all up it’s been a year of considerable change and a year that has hurt and seen many people become closer to financial hardship.

2009 is not one that will bring pleasure or happiness to many people caught up in this economic downturn. As credit lending gets tighter and banks put on the pressure  to repay loans on property that has decreased in value and in some cases decreased to levels below what they owe on the property. Unfortunately this is going to be a reality for some people and there will be more and more forced sales from it. Banks will step in and won’t be accommodating if you’re in a position to not pay them back.

I think in 2009 that the economy will start to bottom out a little. I don’t think we will see the prices of oil drop to much further, or the stock market crash to much further. There will be a lot of fluctuation though that will cause consumer confidence to remain low for a period of time. The New Zealand dollar although risen against the US Dollar in recent weeks will remain around in my opinion the 50c mark and will remain around there. But there is still too many uncertainties to place too much  weight on this.

There are still factors I believe in America that could pan out either way. One of the bigger ones is the car industry and the almost total collapse of that. GM and Ford America are part of one of the biggest industries that feed the American economy. This industry is looking at almost completely shutting down. Already workers are taking pay cuts, working less hours just to try and help the companies stay afloat. But the reality is if the government doesn’t bail them out there is going to be a catastrophic meltdown of the economy in America. And it’s not just the car industry that I am talking about. It’s all the suppliers, all the people who service and or repair the cars, the distributers, shipping companies, you name it they will be affected. If the car industry goes under their will be job losses in the millions. They expect there will be more people lose their jobs than people that live in New Zealand. At this time all we know is that the government have given a reprieve till March 09 and we will have to wait till then to see what will happen.

Back to New Zealand what this really means is 2009 will be a year of consolidation for all I think. It will be the time when people who have borrowed on easy credit will need to take a reality check and downsize and live the life they can afford. I think we have in New Zealand seen the huge falls of commodity prices. It’s now a case of waiting and letting that filter though the system. What I think we will see a lot of people tightening up and living more economically. Not because of want but because of having to.

There are things that could happen in 2009 that if did happen will change everything that I have spoken about. The fact of the matter is that the world is on tender hooks in regards to the economy. It’s almost like balancing a car on a pin, it could go any way and we won’t know till it happens. This uncertainty is going to mean though that volumes of sales and consumer spending is going to remain low into 2009.

For the housing market there will be more and more forced sales in the coming year as the pressures of day to day living and the tighter economic conditions start to mean more job losses and less money for families. There is going to be a need for huge cooperation in 2009 between everybody who provides services and products. As sales volumes drop and bottom lines drop costs are going to be cut and this will mean suppliers are going to need to be flexible with their costs just to keep their existing clients. Food costs need to come down as people find it harder to buy for them and their families, and more people start eating less expensive foods. We will all need to help each other. The boom years have been a selfish time when people have made easy money but now for people to get ahead they will need the support of others. 

For first time buyers in 2009 you will have to creatively think how you are going to service and in the first place get a loan to purchase your house. Thats if you dont have 20% of savings. Use the help of faily that already have high equity in their homes and ask to borrow some of it. Its a risk for them but it also will make you accountable for your repayments. There are many ways and its just about getting that help and support and it applies not just to housing as well. We could all save so much money if we worked together in some things instead of fighting to get the most as we have selfishly done in the boom times. This is not the time do do this.

For the aggressive investor and purchaser I think there could be some good opportunities coming up in the property market. There are already properties you can buy that are positive cash flow. And if you’re going to sit on them for a number of years until the economic climate stabilizes to normal again you will do well out of them. Although I do think that property prices will fall further as there will be time when wages come into line with property prices and may not stablise during 2009. I base this on the prediction that there will be increased forced sales which will put pressure on normal sellers to meet the market where the forced sales are if they want to achieve a sale. It will come down to sellers if you want to sell your house for a good price you need to display added value for the purchaser against the one down the road for similar money.

It will be tough out there for anyone in the next year but if you can ride it you will be fine. 2009 will be a year along with 2008 for global change. People will come out of this and look differently upon how we treat both money and the world. I think there will be a lot of good come out of next year. It’s just a case of taking the hit now and getting on with life. We have all lost out but we will all reap the benefits when they do come around.

December 26 2008 | Uncategorized | 2 Comments »