The Anaconda Market, (marketus constrictus!)
The recent NZ Herald headlines announced a 25% fall in the number of salespeople continuing to ply the trade, no surprise there as the constriction in the volume of sales taking place leads to a lot of hunger and overdraft. I think the drop in numbers in our area is a lot smaller somehow. The number of new homes being built is at the lowest level of recent times further constricting the market and elevating the difficulty of such a vocation. The table shows an increase in median sales value,(probably more higher priced homes selling), shorter days taken to sell (mmm good) and slightly more home sales taking place (more good). Still looking for an increase in sales volume to the 19 year average of approx. 220 homes selling per month.
| Month | No. of Sales | Median Sale Price | Median Days sell |
| March 2011 | 226 | $540,500 | 38 |
| April 2011 | 174 | $547,000 | 40 |
| May 2011 | 187 | $561,000 | 37 |
As a committed long term real estate agent I believe in the long term security of real estate and have started to look for underlying reasons for faith. Our market is different from the US, Aussie and UK but has some similarities so I have taken a wee look there.
Browsing the web trying to find info on the state of the American residential market I was dumbfounded to discover that, according to the Real Estate and Loan data aggregator CoreLogic, as at the end of March some 22.7% of homeowners with mortgages – approx. 10.9 million borrowers – owed more on their mortgage than their homes are worth. Astounding! A full 40% of the “under water” loans, approx. 4.5 million borrowers, had taken out home equity loans, liberating equity and cash from their homes. Zillow.com, a major real estate services provider with a full-on research division notes that the sales of homes foreclosed on in the month of April made up 24% of the market, up from 16% one year ago – the 10th straight month of increases. Recent data has 4.5 million homes in, or on the verge of foreclosure. Such sales weaken the market available to ordinary home sellers, reflected in the fact that in April nearly 40% of sales involved homes selling for less than their previous purchase price. What wealth destruction! This is not the case in New Zealand; our problem is one of a shortage of supply.
Given that the American economy is largely consumer driven, recovery there must surely be slow and weak. It is hard to see capacity for their government to borrow enough funds, or create credit by quantitative easing, to bring about a turnaround any time soon. The effect the American housing market will have on NZ is likely to be limited to the reduction of purchasing capacity and thus the reducing ability of the consumers to buy our exports.
An article on Sky news has one in three new homes in London being sold to buyers from China and Hong Kong – sound familiar? The buyers are seeking ‘affordable’ homes at the 400,000 sterling levels ($800,000 kiwi) and snapping them up. Given that this figure represents thirteen times the average local salary it explains the fact 800,000 people are currently on a waiting list for an affordable home. Our property is a relative bargain even though expensive to our local market for the same reasons.
Thank goodness that NZ has pursued markets in Asia and Australia; we would have been in dire straights otherwise. We are in a very secure relative position with a future that looks positively bright by comparison with theirs; bleak as we consider our circumstances to be, we’re in a very different boat.
I am not clever enough to understand the ups and downs of currency; what is happening in Euro land and potential disruption to our world but if our currency is at 0.5 Pound Sterling and 83cents US, we are doing something right and must be seen as a relatively secure place to put money. A benefit of the rate is that our relative indebtedness drops and with it our debt servicing costs. (It now takes about 12% less Kiwi dollars to pay the interest than when we were at 75 cents to the US, our debt is 22% less in Kiwi dollars than when we were at 65 cents to the US dollar. Wouldn’t it be great if we could pay back some debt now?)
It seems to me that we are progressing relatively well as a nation and that we can justify a degree of optimism. Our exit from the mire will be steady and progressive rather than a rush. A comment from the German entrepreneur seeking residency here to the effect that we will be increasingly seen as a fantastic place to live and grow to those in Europe points to more affluent Europeans heading here; and we are very cheap to them.
For real estate at the moment the prospects are good, too few listings available for purchasers to choose from, fewer new homes, buyers and media starting to appreciate that ‘bargain day’ has past, rents headed skywards and buyer numbers increasing add up to the firming of the market and the prospect of increasing prices.
Once volumes increase to long term average levels on a consistent basis you will know the bottom is well and truly past and then headlines will announce increases in the numbers of sales people – Drat!
June 15 2011 04:42 pm | Uncategorized
David Leggott on 16 Jun 2011 at 3:34 pm #
Gavin
Tis interesting viewing other world markets.
One thing that I touched on briefly before though, is how well NZ fared on this OECD survey;
http://www.oecdbetterlifeindex.org/about/better-life-initiative/
The only thing holding us back from being outright winners was our income standards.
At the end of the day, it’ll be reasons like the ones the OECD stress, that will play a part in assisting an immigrant buyer to select property in NZ.
We sure know what happens when they arrive en-mass.
The currency is currently not wrking in any immigrants favour.
The currency is however, working in favour of local Kiwi buyers, because they are not competing with so many of those “cashed up” overseas purchasers either.
Gavin Hamilton on 16 Jun 2011 at 5:13 pm #
Hi David,
thanks for the link, reinforces the excellence of our land. I do think we will become progressively more attractive to the folk overseas and that they will come with their money; on the other hand a number of pundits have the impending arrival of another financial catastrophe. You pays your money and takes your chances.