Expensive and Unaffordable……………?
I read the offering by Gareth Morgan in the Herald of 15 March and decided that my experience and information lead me to different conclusions. The statistics used by most commentators are probably the rolling median figures compiled by the REINZ. Usually accepted by people to accurately show the market trends and to be the most current, but in any case as long as the same set of statistics is used many years the trend will be representative. I would really like to access figures for properties purchased in ’07 and sold in ’11 for an accurate picture. I suspect the numbers Gareth refers to are general and reflect more of a broad brush approach. Looking at NZ wide returns for the period Jan 07 to Dec‘07, the highest median reached was $352,000. (Gareth refers to June 07 as the peak of the market with a median sale at $345,000.) Through the recession that followed the median went to $355,000 in Oct. and Nov. 09, $360,500 in March 10, $356,000 in April 10 was $350,000 in Feb 2011. Days to sell varied from 30 to 62 in Feb ’09; volumes of homes sold are definitely much less at 4500 compared to June ’07.
Auckland as a city shows the same pattern, $ 445k in Jun 07, and $460k in Dec 07, $470k in Dec09 and now at $465,000 in February. Volumes down and days to sell up to 50 from 28. Prices in the Eastern beaches peaked at $583k in Aug 07 and have hovered between $520-$561,500 for the past year, averaging $542,200. Volumes down, days to sell up; Auckland figures show Feb as an exception.
It appears that prices generally are holding well. There must be parts of NZ, Auckland and such where prices are not buoyant but to my observation prices are holding and even increasing; property sold by spruikers at mass rallies as ‘investments’ in less than prime surburbs are probably at risk. In the Eastern Beach area increasing price realisations are particularly true of family homes in sub-$650,000 price ranges. A good indicator that prices will rise is the shortage of homes to let and resultant increase in rent s asked and paid. NZ Herald made note of expected rental increases of $100-150 a week next year, seems high to me but already people find it difficult to find a home ; short supply. New home starts are nowhere near sufficient to meet demand; such new homes that are being built are costing more, as is land. Councils and the Government are not likely to forgo the huge taxes they collected when a new home is born, are they?
A significant part of the supposed 15% drop in prices alluded to is made up of a 12.5% rise in the consumer price index, may or may not be true but it does seem high for a recession. Ironic that when price drops and losses are incurred in the sharemarket, actual losses occur, when losses are incurred by houses it’s because they fail to increase.
I am aware of some big, big increases coming in components that go into houses, not least timber, and the lower NZ$ will be upping the imported component cost; competition for skilled labour will put up the labour content as the Christchurch rebuilding starts. The cost of new homes will only rise, and rise some more, any other conclusion denies history and accepted market dictum. William Shatner, on the radio a while ago said words to the effect :” whatever you situation is, it is. It’s what you do about it that counts.” I do not take delight in the increasing purchase costs of homes but if people are led to conclusions other than probable reality they can suffer. I am often wrong, as my partner points out, but at least I can offer my thoughts for consideration.
The claim that NZ house prices are unaffordable and expensive, overpriced even, has me confused. There are cheap/affordable places to live in the world (both relative terms); none of them are places that employ ‘Smart Growth’ development policies – ie.a desire to limit urban sprawl by regulation. The USA is divided in two. 80% develops land according to the ‘Smart ‘method’, the other 20% allows for less restrictive land use and development – guess where the affordable homes are!
See if you can find Auckland, Sydney and Melbourne on the graph. 
Note that New Zealand, Australia, United Kingdom, Canada and half the United States are nowhere to be found in Green! As you may expect New Zealand, Australia, Canada, United Kingdom, Ireland have restrictive land use policies. I can see no way that our development practices will be liberalised, the vested interest and protocols would be impossible to overcome, accordingly it seems matters will proceed as per.
For fun, I took representative samples , relatively equivalent, and then converted them to $NZ, you will see that in fact, on the global market that we inhabit, we have inexpensive and affordable real estate, particularly to people who earn overseas.
The table shows inexpensive parts of the country in blue, the more expensive cities in yellow; a capitol city is equivalent I think. The first samples in blue are the most ‘affordable’ places in the land, a surprising correlation in values/ costs.
We look almost cheap; no wonder so many people want to live here! More so when consideration is given to the actual building the median represents. Shows that you can afford a home in NZ, it just may not be exactly where you want it.
Just in case you are interested, below are some summary figures and information from the recently released 7th Annual Demographia International Housing Affordability survey: 2011. Other than that, hope all is well and you are prospering. Always happy to hear from you and available for any real estate queries you may have.
March 17 2011 | Uncategorized | No Comments »