So the figures for March are now available and make for interesting reading.
March is traditionally one of the better months of the year, along with September, and it’s fair to say that both failed to fire. Whilst the number of sales did increase from Februarys’ nasty 147 to 190, its worth noting that over the last 10 years only March ’08 (131 sales) has achieved fewer sales. Volumes are not good.
The median price continues to hold good value at $551,667 and fully, 60% of all sales were less than $600,000, that matches anecdotal perception that the less expensive homes are selling.
Interesting to see the return of the $1m+ buyers with 3 sales between $ 1-1.5million and 2 sales over the $2million mark. Something for everyone except a paucity of sales in the$700-1m price bracket.
Days to sell back to 33 says that the sales that do take place are either new to the market or are smartly re-priced if they have been offered a little high initially.
Funny the way the various media have been commenting on the state of Real Estate, often contradicting each other in the same publications. Items we can all agree on include the rising costs of material used in building with timber up 15% with another 15% to come, steel has just gone up and soon labour will have risen as our builders go to supply demand for new houses in Aus.
Given that we are still seeing 10,000 too few new houses too few being built annually supply will continue to be constrained and, together with the increasing cost of building new homes, will act to maintain prices – if not to increase them.
The surge of property for sale from investors abandoning the market which was expected by some commentators, which was to lead to an oversupply of lower end property and contribute to a softening of prices , did not come about . Ironically the investors decided not to worry too much about the proposed tax changes until after the fact and simply re-let their properties leading to the biggest rental month on trade me to date and to the lowest level of property available to let since Adam was a cowboy.
Weekly rent in sought after Auckland areas went up although nationally levels remained static. Rents will surely go up as supply continues to become more restricted.
As the year progresses we will see the beginnings of interest rate rises ,which simply mean the economy is recovering to the extent that the reserve bank is worrying about inflation . It also means we are moving ahead as a nation away from this recession, jobs will be created and those employed will be more secure – all positive stuff. What you will be witnessing is the birth of the next cycle and the end of this current one.
As the good news spreads, the interest rates rise and the populace gains confidence they will start to commit to cars boats and houses again; bit by bit normal service will resume, ironically at increased prices where houses are concerned.
We really are a blessed lot especially when compared to other peoples trying to build a future – try being Greek, Italian, Portuguese, Irish or Spanish. Our very smallness will be our salvation and we do have a future worth having. If you believe in the future of our country and city, and wish to improve your own future you can, and should, invest and provide for yourself. There is no need to be at the mercy of an undisciplined and unregulated financial market, security and safety combined with solid returns are available to you in the residential real estate market; as an owner occupier or indeed as a landlord.
I am always happy to entertain alternate views or argue my case and would love to hear from you
April 19 2010 | Uncategorized | No Comments »
…………the more they stay the same. Some Easter thoughts on why the current house prices, unaffordable as they are will continue to become more so. Think in terms of the ability for Government to dis-establish long term practice. Sorry it is a little dry.
The New Zealand economy is showing signs of a rebalancing and recovery, including a revision of the GDP growth forecasts for the 2010 year from 2.5% to 2.8% (an improvement of 12.5% – not too small). Further good news includes an apparent move from consumption growth to external growth, a rise in world commodity prices with a recording of the second highest levels in February and a New Zealand/Australia dollar cross rate at lowest levels for a long time, effectively increasing our competitiveness in our biggest market and particularly good for the tourism markets.
The Reserve Bank of New Zealand projects the same broadly based upturn with 3.8% growth in the 2011 year and 3.9% in the year to March 2012. Good solid broad based growth, reliant to a degree on a global growth backdrop, mainly Australia and in turn China.
Good prospects then and a future that should underpin our way of life and particularly our housing values. It has been said that the only genuine measure of scarcity or abundance is price and I would add, capacity of the public to pay. Reading accounts of the better life in Australia, the extra discretionary choices and options etc that exist piqued my interest. I do not observe these advantages on my visits so did a little light reading over Easter.
Most relevant information I can gather involves “median” measurements i.e. the middle figure in a range. Affordable housing is internationally accepted to be defined as 3 times or less the median household income. Considering Australia and New Zealand, the relevant multiples are:
Sydney 9.1 times, Sunshine Coast 9.0 times, Gold Coast 8.6 times, Melbourne 8 times, Wollongong, Adelaide, Newcastle at 7.2 – 7.5 times
Perth and Hobart at 6.8 – 6.9 times median income.
New Zealand is more affordable, Tauranga comes in at 6.8 times, Auckland 6.7 times and the most affordable measure was Dunedin at 5.6 times. For there to be “affordable “housing in New Zealand, houses, especially n the major urban centers, would need to sell for $200,000 including a section – probably not in my lifetime!
If you are a Doctor, Lawyer, Engineer or such and will be paid significantly greater income there may be significant benefit and opportunity in a move to Australia, but it is difficult to imagine that the extra income translates to increased home buying opportunity i.e. a median wage earner here will probably be a median wage earner there, the multiples are higher there by significant margins.
I could not access figures for New Zealand but in Sydney 57.4% of household income (50.4% in Melbourne) will go to pay the mortgage on a median priced house. We are pretty much the same in New Zealand.
What does it mean to us? In a nutshell, house ownership will become less the norm, more people will pay an increased rental for a place to live, and it will become more likely that it will be a high density type dwelling. It also means households will have less money to spend on children’s educations, holidays, and consumer items, i.e. restricted life choices.
The relationship between less affordable house prices and Government policy is highlighted in the 2010 Demographics Housing Affordability Survey, indeed the report states that “It is highly likely that New Zealand would not have experienced a housing bubble if the Resource Management Act has been administered as intended”.
New Zealand and Australia have unaffordable housing as a result of the high density, controlled growth policies they implement, particularly about land, largely based on the British model. Everywhere the policies are implemented, houses are unaffordable, particularly in urban centres. Demand simply outstrips supply, it has been so since the 1980’s and is getting worse.
If the information above makes sense to you, you possibly draw the same conclusions I do; an improving economy means more people are able to pay more for homes to buy to live in themselves and to buy for rental. Restrictive land supply with increased taxes and imposts means more expensive new homes compounded by the shortage caused by lack of development monies.
Real Estate will continue to be one of the best options you can exercise with your investment monies. Don’t give up on housing, the continuance of the prescriptive land use policies in force will protect your assets better than any other influence and, I believe, will not be able to be changed in the median term.
Good news is that we are becoming more like Australia daily; soon we will also enjoy mining receipts.
April 06 2010 | Uncategorized | 2 Comments »