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 »

Christchurch Real Estate Prices Keep Climbing.

I have been reading a few things lately about the Real Estate prices in and around Christchurch and New Zealand. There seems to be much talk about the market prices climbing up and up and up in recent months and reaching what one is calling record prices. What the hell is going on. The country is still suffering one of the longest recessions in recent times and Real Estate companies across the board are spouting out that the housing market is in full recovery.

Here is what I read on stuff.co.nz http://www.stuff.co.nz/the-press/news/christchurch/3239911/House-prices-break-record

Median house prices in other regions in the year to December were, with annual price growth in brackets: Nelson-Marlborough $343,500 (14.5 per cent), Wellington $400,000 (8.1), Southland $184,000 (10.84), Otago $230,000 (unchanged), Central Otago Lakes $432,500 (1.16), Auckland $470,000 (6.81), Northland $306,000 (minus 2.08), Taranaki $280,000 (7.69), Manawatu-Wanganui $230,000 (2.9).

Come on. Look at the bigger picture and look whats going on. Now I know I am not qualified to rattle off any official stuff. But you have to ask the questions that will this price recovery actually keep going. And when they talk about median prices. The reality is that more higher priced homes have been selling in the last 6 months than in previous homes comparatively to the lower priced homes. From my understanding of going to peoples homes the amount I have been most people who own homes under the 400k mark are finding the times tougher and arent moving.

Compare that to many people who are downsizing their homes at the moment. People in bigger houses in posh locations looking to downsize and have something with smaller mortgages. The reality is that people out there still worry about the prices of homes. Our home affordability allbeit better than previous years is rising fast and is one of the most expensive in the world.

On top of all of this you have to keep in mind we still have an extremely low OCR which is tipped to rise by June this year kissing good bye to the relatively cheap money we have had access to for the past 12 months. Bollard has tipped a mid-year increase in the official cash rate from its current record low 2.5 per cent but the market is anticipating he will start as soon as March and have hiked the OCR by 75 basis points by June 30.

I am sorry to say but if you look at the signs they do not paint a pretty picture. The average Kiwi is going to be priced out of buying a home. And if they do they most certainly will be stuck with a massive mortgage.

I feel the Real Estate industry shouldnt be telling the country that house prices are heading to an all time high. Its just not healthy to be doing this at this time. Sellers will start to expect higher prices. Great if your a home owner though. There is a drought of listings at the moment. A sure sellers market. So what the industry needs to do is attract more listings. Which is what the article above will most certainly do. Before you buy or sell right now make sure you do your research on true facts as there are too many conflicting opinions out there, including mine. But you need to look at cold hard numbers and look at the trends.

Good luck.

January 19 2010 | Uncategorized | 2 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 »

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 »

Building Consents Rise As The Last Of The Summer Spend Ups Occur – Winter Is On The Way!

This is an interesting article from the Herald Website which is further indicating that the market could be improving. My honest opinion is that the facts below are just the spike that naturally occurs at this time of year. The numbers we are experiencing are well below what we have known for many years. Our economy is going to be hit hard over this coming year with many mortgagee sales fueling what will be a very volatile market. The building consents that are signaled below are a sign that the market could be improving as their is some renewed interest as the interest rates drop to low levels. But maybe this is over as well as the banks increase these rates. It will be an interesting winter to watch and see what happens. Below also is a graph from the govt.org website of building consents issued in NZ. You can see clearly the downward trend of consents issued and the sharp decline since about March 07.

Building consent figures for February improved from January’s deep hole, but remain low.

Last month 1059 dwellings were authorised, of which 193 were apartments, Statistics New Zealand (SNZ) said today. In February 2008, 1874 dwellings were authorised.

Seasonally adjusted, the total number of new dwellings was up 12 per cent in February after falling 13 per cent in January. When apartments are excluded the improvement in February was just 0.3 per cent.

January’s total of 812 consents was the lowest monthly total since that series started in 1965.

The value of residential building consents in February was $358 million, down 42 per cent from February 2008, SNZ said.

Non-residential building consents were worth $382m for the month, up 5.8 per cent from a year earlier.

This morning’s building consents come as the recession puts a halt to many construction plans around New Zealand, including Wellington.

Funding has been pulled on the luxury $200 million Watermark development in Wellington, and other apartment buildings around the city have also halted construction.

Dougal List from the planning department at the Wellington City Council said resource consents were down 10 to 15 per cent from the same time last year.

Applications for commercial buildings and renovations remained strong but the pace of activity was much slower than it was 12 months ago. He said many people are looking to get consents in place so they can develop once the market picks up in a year or two.

List said the main casualty in the market was multi-unit developments which has almost completely dropped off as developers struggle to get finance.

Statistics NZ said that as with the previous month, the value of consents for residential buildings in February was below the non-residential value. Before January the last time that happened was June 1998.

For all buildings, consents had a value of $740m last month, down 24 per cent from February 2008.

In the year to February, residential building consents were down 26 per cent from a year earlier to $5.77 billion, non-residential consents rose 5.5 per cent to $4.59b, and for all buildings the value was down 15 per cent to $10.36b.

March 30 2009 | The Market | No Comments »

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 »

A Quick Guide To Buying A Home. What To Look Out For, What To Watch.

There is probably no better way to become aware of the condition of a home than to have your home inspected by a licensed inspector. However, there are several considerations on which only you, as the purchaser, can decide. And, as I’ve said in other articles, it’s my belief there are some things you must do yourself: Manage your money.  Raise your children.  And, also… purchase your home!

1.    Location, location, location…

Probably the most important factor is that your new neighbourhood is a good fit.  Take some time to drive around the area and make sure you like it. Check out the traffic at rush hour – if the home you like is on a main street, make sure the traffic noise won’t be a problem for you.

Additional location considerations might include: Where are the closest schools?  Having schools nearby can be great if you have young children yourself.  It can be rather annoying with noise or traffic, if you don’t!  Does the lot back to a wash? If you have cats or a small dog, they might be at risk to urban coyotes and other wildlife. Is there an alley? Alleys have both positive and negative features. They provide a buffer between you and the back neighbor, but they also give opportunities for clandestine behavior since they are relatively private.

You might want to check the crime statistics for the area, something you can find by googling “neighborhood crime data” along with the community of your choice.  You may also go to the county sex offender registry and make sure you are comfortable with your neighbors. I

Check into nearby vacant lots. You never know when the lot your kids play on will be developed into something you might not want to have as a neighbour.

You can even ask your agent to speak with your potential new neighbors. Find out if there is any unreported crime; ask if there is a rock band that practices all afternoon. Find out if there is a problem neighbor at whose address the police have a reserved parking spot. Ask the immediate neighbors if they plan any major remodeling or additions. This could lead to a year of construction vehicles and noise from sunrise to sunset. A few minutes of due diligence can prevent an unhappy ownership situation.

Make sure the lot has good features; i.e. not located in a flood area, and not the lowest lot in the area (sure to be 3 inches deep in water every time it rains). Generally this is not a big issue because most municipalities will not give a building permit for such areas.�
 

2.    What do I really need…?

The home you pick should meet whatever needs you or your family have. Think about the future. Having kids? Already have kids? Kids leaving? Getting married? How big a home do you need, how many bedrooms and bathrooms? For later resale, the most popular single family home is a 3 bedroom 2 bath home. Homes with only 1 bathroom or only 2 bedrooms are more difficult to sell than the more standard 3/2.

Take the family and spend a little time in the home. Spend a couple hours, especially during the morning or afternoon rush hour. Make sure the noise and activity levels are acceptable, and make sure the home has all the conveniences you like.

Is a pool important? Somewhere to relax on those hot summer weekends? Be sure to inspect the pool closely, using a professional inspector. Pool maintenance can be quite expensive and time consuming. I personally do not have a pool service, instead I have an automatic chlorinator and an automatic pool sweeper. These items are a significant up front expense, but can yield years of virtually maintenance free pool enjoyment. Insist that all pool equipment be in excellent working condition.

3.    Last year’s remodel… this year’s nightmare?

Many older homes may have been converted from a one bath to a two-bath home. You can usually tell.  Make a careful inspection and see if this was done.

Sometimes a master bath has been divided and made into two bathrooms. If the remodel was done well and permitted (a permit was obtained from the municipality), this is a better situation than a poorly done, unpermitted change. You can often find permit information at the city planning office.

Sometimes additional square footage has been added to a home, either by converting the garage into a bedroom or office, or by enclosing the patio. Telltale signs of this might be: No garage, or a garage door that is still there but has no purpose; a slanting floor (garage floors and patios often slant to provide drainage); unusually low ceilings in one room; no air conditioning vents in the room; an outdoor carriage light on the wall of the room; a room with one cinderblock wall and 3 wood frame walls.

Some homes built with a carport have had the carport enclosed. This is an inexpensive and useful remodel, provided it was done correctly and with the proper permits. Things to check for: A window from the house into the garage; garage door is not self closing and/or is not  a solid core door; one garage wall is block, the other walls frame; no power outlets on the garage walls except on the back wall.

Look at the flooring in the home. Flooring is an upgrade many homeowners attempt on their own, but without sufficient skills. Often before selling, owners will rip out old carpeting and install laminate wood flooring. Look for the seams in the laminate; one of the more difficult things for the unskilled installer is to plan the job appropriately so that the seams in the flooring come out right, with no gaps. Further, many installations run right up to the baseboard – sometimes there are two baseboards, the old original and then the new baseboard to cover the gaps from the flooring!

The proper installation is generally to remove the old baseboards so that the flooring is seamless from wall to wall and only a single baseboard is installed. New baseboards should be installed – this minor step costs little and makes a big difference. You can often see a discoloration at the bottom of the old baseboard where the carpet used to be. And, most do-it-yourselfers are not good at mitering the corners and fitting the baseboards perfectly. Just look at the joints and the corners – you will be able to tell, easily, whether the installation was done well.

Tile is another homeowner do-it-yourself favorite, and again, without the proper skills, the job can look terrible close up. Uneven levels in the tiles, grout lines that are not straight, and poorly done corners are just a few examples. Just look at the work, you will be able to tell whether it was done professionally or not.

Finally, look for additions. This is often evidenced by one part of the home leaning away from another part – look at where outside walls meet. Look at joints in the outside walls and see if they are pulling away from each other. Look at the flooring in the home at the same point; if there is carpeting, it is harder to tell, but sometimes the addition will have a different slope from the main part of the house.

For information about remodel work, trust your home inspector. This sort of thing is often more cosmetic, but might make a big difference upon resale.

4.    Who built the ark?  OR….

How is the home constructed? Some older homes are slump block, and this is a wonderful thing, as the utility bills will be substantially less than for a frame house. These homes stay warmer in the winter and cooler in the summer.

While my personal favorite construction is slump block, a close second would be block homes. With these homes, you may find the cable TV companies complain when they have to drill through the block to add an outlet! Block or brick, or some form of masonry, can provide a strong, stable framework that has inherently good insulating qualities.

For some time, homes were literally built by framing the home, wrapping it with insulation and chicken wire, and then using a gunite machine to spray stucco on the outside. I know I am not characterizing this very well, but it is probably the bargain basement construction method. Unless this process is completed carefully, the stucco can develop cracks. Newer homes are built with framing, then engineered wood (plywood or particle board), then insulation and stucco. This is much more stable than chicken wire over framing!

Any of these construction methods, done properly, are acceptable. My opinion is that the risk of problems is lower with masonry of some sort.

When my grandparents bought their last home they did not check any of the electrical outlets. The inspector verified that they worked, but the brand used by the contractor must have been the very cheapest, because none of them will hold onto a plug – the spring action is so weak that the plug literally falls out of the outlets, this is just something to keep an eye out for.

Similarly, look at the valves under the sink and toilet. Make sure the lines are copper and not galvanized. Galvanized pipe, installed in the 70’s, will almost surely be rusty and possibly leaking now, 35-40 years later. Insist on a repipe to copper at the seller’s expense. Have your inspector make sure the plumbing is copper.

I like to make sure the inspector checks the shut off valves under the sinks and toilets, because in older homes, they are often frozen and impossible to use. If there is any evidence of leaking, have the seller replace them with new ones which are less prone to freezing. When you have to have your sink or toilet worked on, you won’t have to shut off water to the entire house for half a day.

5.    Rules, rules and more rules…

who ever your agent is they should make sure you get a copy of any Covenants, Conditions and Restrictions on the property. These are rules associated with a property which are part of the deed and run with the land. 

Other things to think about (this list is by no means complete):

-    Cost of homeowner’s insurance

-    Taxes/Rates

-    Utility costs

-    Garbage pickup / bulk pickup

-    Neighborhood watch

-    Internet service

-    Sky

-    Street condition, paving

-    Security system

-    Paint condition

-    Driveway condition

-    Roof condition

-    Age of air conditioners

-    Septic or sewer?

-    Age of faucets and other fixtures and their condition

-    Type of electrical wiring (aluminum, copper?), electrical panel, breakers

-    Condition of shower enclosure and tub area (mold?)

-    Insurance claims history

-    Street utility manhole in front of house?

-    Distance to fire hydrant?

-    Water pressure?

-    Condition of watering system for grass, shrubs?

Finding the perfect home for you and your family should be an enjoyable experience.  I hope these guidelines will help you in your search and home buying experience! Good luck.

February 08 2009 | Buyers | 1 Comment »

New Zealand Housing Affordability Is The Second Worst In The World

The article below is an article that has been published in the New Zealand Herald and after reading it though I thought was one of the most informative and interesting articles that details the problems that we are facing in terms of our New Zealand housing market. Simply put the prices of our houses in New Zealand are high. Housing affordability is becomeing alot better but is still a long way off the rest of the world. Have a read through this article and leave your thoughts at the bottom in the comments box. 

According to the 5th Annual Demographia International Housing Affordability Survey, buying a home in New Zealand is prohibitively expensive due largely to planners. 
The reality, however, is far more complex.

In this instance, coming second to Australia is not so bad. The Aussies are the undisputed world champions in unaffordable housing – a home in the lucky country costs 6.3 times the average annual household income.

But New Zealand is not far behind. Buying a house in Godzone is prohibitively expensive too – 5.7 times average household earnings. Crikey. That’s almost double the rule of thumb for affordable homes – that they should cost no more than three times annual household income. In Canada the “median multiple” is just 3.5. And in the United States, it’s 3.2. How the hell did things get so out of whack Downunder?

According to the 5th Annual Demographia International Housing Affordability Survey, the root of the problem is planners – specifically the way their zoning rules and regulations constrain the supply of land.

Free up the supply of land, especially at the city fringes, says Demographia and housing will become affordable again. More suburban sprawl brings housing for all.

What may be surprising about Demographia’s analysis is not that it reflects a property developer’s ultimate fantasy, but that the Government is buying its message.

“National understands there’ll be property cycles, but the recent cycle has been so extreme as to suggest there are fundamental problems with how the market is operating, notably around the supply of land,” said Housing Minister Phil Heatley last week.

“This research proves that many first-home buyers are excluded from entering the property market by a number of factors, including restrictive zoning and consent laws, which not only make life difficult for ordinary Kiwis but are major factors in New Zealand’s poor productivity and economic growth levels.”

Actually, the research doesn’t prove anything about restrictive planning. And before jumping on the Demographia bandwagon, the minister might want to take a closer look at the survey.

The non-profit social change agency, Shelter New South Wales, commissioned research in October 2008 to do just that. It found the overarching methodology flawed, pointing out that it includes all house prices across an entire city – multimillion-dollar properties alongside lower cost homes.

That can easily give a skewed impression. “A city with a high median multiple might have large numbers of affordable properties that operate as separate housing markets in the city,” says the research. Demographia only includes home purchases, excluding dwellings in the public and private rental sector, which are important sources of affordable housing supply.

Andrew Coleman of Motu Economic and Public Policy Research is concerned too that Demographia’s analysis doesn’t take into account the essential financing cost of a house over an extended period of time. “For most of the last decade New Zealand has the highest interest rates in the OECD, so that makes housing far less affordable in New Zealand than elsewhere.”

Another feature not taken into account is the increase in the average size of new houses in New Zealand – from about 130 square metres in 1990 to just under 200 square metres today. He notes too that the boom in house prices in New Zealand has occurred in places like Timaru which have few problems with land availability. “It’s not really obvious that we have constraints in finding sites to build on .”

Shelter NSW’s research argues housing affordability is a complex mix of supply and demand variables including income levels, employment trends, access to (and the cost of) finance, demographic shifts, and housing preferences.

“The Demographia surveys reduce this very complex issue to a simple casual relationship between house prices and assumed planning constraints on land supply,” says the research.

The research takes issue with Demographia’s claim there is an economic consensus regarding the role of “prescriptive planning” in causing housing affordability loss.

Demographia: “There is a growing consensus that more land must be made available on the urban fringe to accommodate new residences and that a competitive land market needs to be restored.”

Shelter NSW: “Most authoritative economic sources focus on demand factors (eg falling real interest rates, strong economic growth, immigration rates, and, in some countries, weakening lending standards and easy credit) to explain house price growth…”

Shelter NSW’s research also criticises that lack of empirical data on whether a city’s planning regime is “prescriptive” (bad) or “responsive” (good) and concludes that Demographia’s planning data “conveniently reflects the subjective impressions of the authors.”

But while Demographia’s view may be understandable, given that one of its authors is Christchurch property developer Hugh Pavletich, the overall finding that housing here, and especially the land component, is overpriced, can’t be denied.

Other housing affordability indexes paint a similar unaffordable picture. But unlike Demographia, they focus on the cost of mortgages and highlight the fact that – thanks to falling house prices and falling interest rates – the tide is turning rather sharply.

Interest.co.nz shows that it now takes 59.6 per cent of one median after-tax income to pay the mortgage on a median priced house purchased in December, down from November’s 63.8 per cent. The index was a whopping 81.1 per cent a year ago and 52.3 per cent five years ago. It reached its highest point – 82.9 per cent – in November 2007.

But as Interest.co.nz managing editor Bernard Hickey points out, while prospects are improving, housing is still out of reach for most. “We reckon housing isn’t affordable again until we get near the 40 per cent mark, where it was in 2002 and early 2003.”

For household incomes the picture looks better. “Median-priced housing is now affordable for families in New Zealand when both adults work,” says the website. On this measure it now takes 38.9 per cent of a median household take-home pay to service a mortgage of a median home purchased in December. That’s down from 41.6 per cent in the previous month and a year ago, when it was 52.8 per cent. But it’s not as good as five years ago when the index was 34.5 per cent.

First-time buyers, however, continue to struggle. It now takes 52.2 per cent of one median income of a person in the 25-29 age group to pay the mortgage on a lower-quartile priced house in December, down from November’s 54.4 per cent.

“Essentially a single median income for a first-home buyer is not high enough to buy a lower-quartile priced house, even with a deposit around 10 per cent of the house’s value,” says the website. “However, a couple/family with more than one income may find the lower-quartile house price is affordable.”

Massey University’s Home Affordability Index to November paints a similar picture – showing affordability improved 4.6 per cent over the last 12 months. The national index is based on median house prices, average personal income and mortgage interest rates. In November it was 32.31 – still a long way off an affordable 20 last seen in November 2002. (A low index equals improved affordability).

But just when the trend towards affordability is improving, a new barrier has emerged – the banks’ increased deposit requirements. Whereas in the past, banks regularly lent 95 per cent and sometimes 100 per cent of the mortgage, they now require a 20 per cent deposit. “Based on current income and house prices it will take an individual 8.2 years to save the 20 per cent deposit as now required by most banks,” says Interest.co.nz. A first-time buyer wanting a lower quartile priced house will struggle too – taking 6.6 years to save the 20 per cent deposit as now required by most banks.

Despite such hurdles ahead, Demographia maintains freeing-up land on the fringe of metropolitan urban limits will save the day. Pull up the boundary fence and let the city limits push out. In its vision of suburban paradise, Demographia does not dwell on the downside – that a more sprawled-out Auckland for example would result in increased infrastructure, transport and social costs.

There’s another problem too. Changing zoning laws doesn’t automatically lead to cheaper land – especially when greenfields land is concentrated in the hands of a few land-bankers.

Professor Bob Hargreaves, of Massey University’s Property Foundation, points out that the land-bankers would need some other incentive to sell. “Research shows that freeing up the land doesn’t make much difference. The reality is, it’s not in the developers’ interest to suddenly dump a lot of sections on the market at low prices. There has to be some penalty on developers if they just sit on land and don’t bring it into the market, but I’m not sure on how you do that.”

From a developers point of view, Hargreaves says it makes sense to corner the market and drip-feed sections on to the market to get a higher price.

A closer look at Demographia’s list of 87 “affordable” housing markets in North America gives new meaning to the word. “Is it any coincidence that the top 20 most affordable markets are in economically distressed regions?” asks Keith Hall, chief executive of the New Zealand Planning Institute and a member of the American Institute of Certified Planners. “These are mostly the ‘rust belt’ cities of the American Midwest and neighbouring Ontario in Canada, areas chronically plagued by high unemployment among predominantly blue collar auto industry workers. The one exception to the auto-steel industry connection among the top 20 is a community on the equally distressed Atlantic Coast of Canada.”

Hall, who stresses his views are his own and not the official position of the New Zealand Planning Institute or American Planning Association, says many of the cities in Demographia’s affordable regions are mostly inland cities in the vast Midwestern flatlands of humid summers and extremely cold winters. “The first Sunbelt city on the list, Killeen, is best known for its large Army base, and a 1990s mass murder that made global headlines.”

Unplanned and unzoned Houston is often touted as an example of how the lack of growth management and the absence of planning can maintain regional affordability. But the irony of Houston is that it’s a city with lots of planners. “That is where I began my career in planning,” says Hall.

Yes, planning processes in Houston are certainly different, and both the regulatory environment and the flat coastal landscape allow unabated sprawl in nearly every direction. But, says Hall, a key advantage to Houston’s system of planning is that it has facilitated central city intensification. “Even in free market Houston, there is strong demand for high quality, medium and high density housing in walkable, mixed-use neighbourhoods with good public transport access.”

Hall also owns a house in Houston – a convenient six blocks from a tram line that passes close to every sports stadium, most of the city’s world-class museums and performance venues, two universities, and the headquarters of many corporations. The convenience did not happen through random dropping of a sports stadium here and a museum there says Hall. Planning took place to ensure that these major investments captured “the synergies of co-location”.

As to affordability, Hall points out that while mortgage interest rates are significantly less in the United States, property rates, insurance, and utilities costs offset Houston’s affordability when compared to Auckland.

Looking at Demographia’s 64 “severely unaffordable” housing markets in North America, Hall notes most are coastal cities and many are near mountains. “Never mind the artificial constraints that politicians place on these cities with their growth management and zoning regulations, these cities face real limitations on growth in constrained geographies.”

“If you want to live in an affordable housing market, why not move to the most affordable city on the list?”, says Hall. Homes are affordable in Youngstown in Ohio because more people are relocating away from, rather than to this prime location also known as “Murder City,” and offering the “Youngstown Tune-Up” – auto worker slang for the city’s frequent car bomb assassinations.

A close reading of the Demographia data shows “affordable housing” is found largely in flat terrain with extreme climates, high levels of crime, dying economies, few natural amenities, and limited prospects for academic and professional achievement for the next generation.

But Hall, like Shelter NSW, says the value of the Demographia reports is that they highlight housing affordability issues and serve as starting point for a dialogue between developers, planners, economists, banks and government that urgently needs to happen.

Hall agrees there are planning and growth management challenges in the mix, but other complex issues also contribute to the problem. If a dialogue were to occur, Hall and others say the taboo subject of a capital gains tax on investment property should be on the agenda. So should government incentives for first-time buyers such as cheap interest and suspensory loans – especially for new houses.

And, if the Government is serious about finding ways to stimulate the economy, getting builders out there building – invigorating a supply chain that reaches all the way back into our forests – seems a good place to start.

February 01 2009 | The Market | 3 Comments »

Kitchens And Bathrooms Sell Houses

What are the two areas that we spend the most time in during any one day? The answers is the kitchen and bathroom. These areas are the business areas of anyones home and can easily set your home apart from the others. In previous posts I have spoken about the need, espessially in this current market to set youself apart from your competition. People spend a large part of their day in their kitchen and bathroom and this goes hand in hand with all the research I have looked at that has shown these two rooms to be at the top of the list of selling features when it comes to real estate sales.

Todays trend is to have an open plan kitchen. A big open plan kitchen can be good for watching the kids while making dinner, but not only growing families are looking for a larger kitchen. Open plan kitchens are also great for those who enjoy cooking and entertaining. When it comes to selling your house take care to make sure your kitchen is showing its true counter and cupboard space by clearing the bench clutter and removing excess decorative items from the tops of cupboards and in glass door cabinets. Also, make sure there are no additional carts, bookshelves or tables hindering the traffic flow.

When showing the house make sure the kitchen looks bright and clean. This area is generally the ladies area. In the kitchen you need to be thinking “how am I going to get the ladies to like this area.” This isn’t fact but generally the lady in the family will have more say when it comes to the buying process and the kitchen is a great place to start winning her over.

Today’s image of the ideal bathroom is that of a spa-like getaway inspiring a sense of relaxation and freshness. No matter the size or style of your bathroom, you can make it a more restful place to escape. The bathroom is a family area and generally a private area where parents are looking after their younger children or the rest of the family are cleaning and preparing themselves for the day or night. It’s very important.

Here is a list of things you can do to improve these two key areas in your home:

* Start with the paint colour. Pick a neutral colour that will flow nicely with the rest of the home. Paint the ceiling a tint of that colour and the trim a lighter colour. White trim can give a clean feeling to a room.
* Fix damaged tiles or replace unattractive flooring. Old vinyl tile with mold and mildew stains will really diminish the value of your home. Update with current flooring to make the room look more appealing and larger. Take the time to line up new tiles properly, crooked tiles or inconsistent patterns are not an improvement.
* In showers, sinks, tubs, or toilet repair damaged caulking and get rid of mildew stains. Wash fabric shower curtains to remove mold and mildew or purchase new shower curtain liners.
* Shine hardware. Make your faucet, taps, and showerhead sparkle. Use a toothbrush around faucets where it is difficult to clean. Turn your shower curtain bar, so that the shiniest part is facing outward. The eye is attracted by shiny things and it will make any hardware look new again.
* Sinks should be clean and stain free.
* Tighten or replace loose cabinet handles. Updating cupboard hardware can be a really quick update and change the whole feel of the kitchen or a bathroom vanity.
* Leaky faucets should be repaired.
* Old kitchen and bathroom cabinets should be painted or refinished. Do not be afraid to paint wood.
* Bench tops that are old and scratched should be replaced; an updated bench top will make a big difference in the offers that you receive.
* Remove garbage for a clean look and smell. Make it smell pleasantly clean but be careful not to over-scent with products that may be offensive to some.
* Allow natural light to come in. Tie back curtains and reevaluate window treatments. Window treatments should highlight the window, not conceal or distract from it. Clean mirrors, lighting fixtures and bulbs as well as, windows inside and out.
* Remove things that make the house and these areas personal to you. As they are family orientated areas people will want to try and imagine themselves in there.

By doing these things and possibly spending a little more time fixing or cleaning these areas can have a great effect on the selling of your home. I am not going to say that it will increase the value of your home – unless you totally renovate. But what I will say is that it will give your house that edge to stand out in the crowd. With sales volume the lowest in 17 years you need to have an edge and a reason for people to want to buy your house. I believe if you follow the steps outlined above you will be well on the way to having a better competitive edge than your competition.

January 18 2009 | Sellers | 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 »