Tag Archives: Investment

Greater Christchurch growth amongst top four

Pages from nz-housing-quarterly-june-2014

From the DBH’s June 2014 Housing and Construction Quarterly. Click to enlarge.

The July issue of NZ Property Investor reported that three of the four top Territorial Authorities for annual price growth were in Canterbury. While these figures are a clear reflection of a province “in the rebuild” and need to be kept in prospective, I think it is not unrealistic to come to the conclusion that as is Canterbury’s case opportunity and growth follows calamity.

The article makes an interesting read and was written in the context of cautioning investors to be mindful that the two big cities are unique markets in their own right, being careful not to treat this dynamic as a national trend:

In April 2014, the top four Territorial Authorities (TAs) by annual price growth were Auckland (14%), Waimakariri (8%), Christchurch (8%) and Selwyn (8%) … while the four Auckland and greater Christchurch TAs aren’t always the top four, they have consistently featured there over the last 12 months.

This suggests Auckland and greater Christchurch have their own price dynamic that is completely different from that of the rest of the country. Rather than just being the fastest-growing part of a national market, they really need to be seen more as a market on their own, with their own dynamics. So long as this situation persists, national aggregate data will have to be treated with caution.

The report [the Department of Building and Housing’s quarterly update] also noted the strength of Christchurch’s rental market. It said Christchurch rents would reach Auckland levels by the end of the year on current trends.

Canterbury reported the strongest year-on-year rental growth in the year to April with average rents up 12%.

Greater Christchurch recorded an average rent of $431 per week, compared to Auckland’s $451. The national average is $374 per week, according to the DBH data.

I fully support the article’s advice of looking at the “big picture”, however I equally encourage pursuing evident opportunities. Clearly Canterbury is providing a raft of such opportunities for the astute investor – it’s time to grab the bull by its horns!

Ten reasons this property cycle is different to the last

10PropertyCycle

From the latest issue of NZ Property Investor magazine:

  1. Stricter lending criteria by banks makes over-leveraging more difficult.
  2. The Reserve Bank’s LVR changes are also s topping investors from gearing so high.
  3. New Zealand’s economy is fundamentally stronger than at any time during the last property cycle.
  4. Investors tend to have a more cautious attitude to debt after the Global Financial Crisis.
  5. There is less of an incentive to negatively gear properties because of removal of building depreciation and LAQCs.
  6. Investors have more realistic views of capital gains with less buying out of comfort zones.
  7. Auckland’s housing shortage must be addressed and Christchurch must be rebuilt, these are unique drivers to this cycle.
  8. Fewer non-bank lender options are available so the risk of over-gearing is further reduced.
  9. Interest rates are expected to peak lower so risk exposure might not be as bad.
  10. Increased property compliance focus by the IRD is putting off some traders.

August stats show steady growth

August 2013 StatsThe stats from REINZ present a picture of an active market here in Christchurch. The median price of $374,000 is up a modest 2.6% on this time last year, although the institute’s house price index (which adjusts for different types of homes selling) found city prices rose 6.1% in a year. Canterbury homes are also among the fastest selling with an average list-to-sell period of 28 days, with the national average at 34.

It’s apparent that this strengthening market is being primarily driven by investors and first-home buyers competing for similar types of properties. Investors appear to be keen to capitalise on the frenzy in the rental market, whilst first-home buyers are keen to secure a property quickly before the Reserve Bank’s LVR restrictions come into force.

It has been my own experience that these relatively modest properties which appeal to both groups are being snapped up very quickly. One of my recent listings at 202 Beach Road, your classic three-bedroom, one bathroom, Summerhill stone home sold above asking price after only four days on the market – and it was TC3.

Links:
Liz McDonald (The Press): ‘Scramble even for ‘very untidy’ homes
REINZ: Sales and prices rising in August real estate market
NZ Herald: Sales growth slows, property prices up $5,000
David Hargreaves (Interest.co.nz): House market ‘will cool off’, say Westpac economists
BNZ-REINZ Residential Market Survey: No good news for buyers

Upward Pressure on Property Prices

Twelve months ago I remember suggesting that we would soon see an annual increase in Canterbury property values of at least 10 per cent, so it with no surprise to read on the front page of Saturday’s Press that local property values have increased by 12 per cent over the last year.

It would be fair to say that locally the overall supply and demand of housing is underpinning this exponential growth. Combine this with a local economy that is currently experiencing a huge injection of capital as the rebuild of the city progresses, it is not hard to appreciate the upward pressure this creates on the local housing market. Personally I think the writing is on the wall and these clear indicators reflect the reality and intensity of our current micro economy here in Canterbury. How long this will continue is difficult to predict, however like it or not all the indicators are pointing to a sustained upward movement in property values for some time yet.

While it is important that we do not unnecessarily over-hype the marketplace it is a reality that we are confronted with, given a growing population and increased demand for housing. Let’s face it – every new employee that moves to Christchurch has to sleep somewhere.

Good result for first auction of the year
Last Thursday saw the first seven of the Gold franchise auctions offered for the year. With all seven selling under the hammer plus 150 people in attendance this clearly indicated the buying public’s fervour of securing property in the New Year. The McFaddens Road property I marketed enjoyed excellent response with open homes well patronized plus a consistent stream of enquiries. While there was competitive bidding on the day, my encouragement to purchasers is to never be put off by large numbers attending open homes. Clearly, as the case was here, there was plenty of lookers but only a few participants!

The buying public is fast learning to appreciate the transparency of auction and accept that it provides fair and equal opportunity to purchase property.

Enjoy the week and embrace the positive vibe of a city in repair.

Battle of the Banks: Merger Fuels War over Mortgages

At the New Zealand Herald:

Banks are dropping mortgage rates and offering cash sweeteners, loaded credit cards, payment of legal fees and tablet computers as they go to war for customers.

High on their target list are disillusioned National Bank customers, whose bank is to be merged with the ANZ, which owns both brands.

While it is time to say goodbye to the black stallion that has held the head high of a true thoroughbred bank for many years (I remember it back in my farming years in the 1980s!), we can all be thankful of the very competitive mortgage rates on offer as a consequence. The revered black horse has held a market share that has been the envy of most banks and who now see it as an opportunity to lure those that are struggling to come to terms with the merger and dropping of the brand that has been part of the banking landscape for so long.

On the positive, money is so cheap at the moment and this must be one of the most favourable lending eras that we have had for years! While I know here in Christchurch there are more hurdles to jump and criteria to meet post-quake, in my opinion it is well worthwhile enduring the pain to secure a mortgage. Whether it is a first home or an investment property, I believe both fall into the category of “good debt” and will help you get ahead in the long run. With Christchurch already experiencing strong growth in the housing market, jumping onboard has got to be a good thing as demand for housing is set to look high for some time yet.

Go on, now is the time to do it – property is unlikely to become more affordable than it is today!

The lowest interest rates since I can remember

In catching up with our personal ASB banker for lunch today to discuss whether to float or fix some of our mortgages, I actually took the time to consider just how low the retail interest rates are. Twenty-four years ago when I bought my first home in Whakatane for $55,000 with interest rates at 20.5 per cent, we never dreamt that we would ever see rates at a quarter of that! Well how times change, and I would have to say that I came away from our meeting thinking that if we are not seriously thinking about borrowing more money for property investment then we would have to have rocks in our head – quite inspiring actually.

With opportunities still presenting themselves to acquire property at reasonable figures coupled with rental returns beginning to show positive cash flows, I am thinking such scenarios have to definitely go into the “serious consideration basket”.

Robert Kiyosaki in his book Cashflow Quadrant (his sequel to Rich Dad, Poor Dad) provides some sound advice:

Stop waiting for the ‘big deal.’ Get into the ‘game’ with small deals (like my first small condo that allowed me to start investing for just a few dollars). Don’t worry about being right or wrong at first, just start. You’ll learn a lot more once you put some money down … just a little to start. Money has a way of increasing intelligence quickly. Fear and hesitation retards you … but you must start.

It really is about having a plan and making a conscious decision to take action. The seed was sown today for such a plan and it all makes so much sense.

Written Sales Trend Upward

In the latest edition of Harcourts MarketWatch it is interesting to note that with the exception of the Wellington region, all other regions benefited from and increase in written sales for the month of January. While January can be a fickle month (obviously Wellingtonians stay on holiday longer) there is unquestionably a positive trend emerging indicating higher levels of confidence throughout the country.

Harcourts CEO Hadyn Duncan states:

With a severe shortage of homes already in the main centres and no significant lift in new building consents, the competition for existing homes will continue to drive prices up further. Our property investor clients are also going to see continued strength in rental prices with the same issues prevailing.

The writing is clearly on the wall and confidence is returning to the overall national marketplace.

Signs of high demand for rental property…
As we know here is Christchurch demand for rental property has been unprecedented and at levels higher than has been seen for some years. This includes feedback of up to 40 people queuing for the same property, rising rents and the lack of supply in some high demand locations.

Personally, I have received a number of enquiries from investor clients who are beginning to show interest in extending their property portfolios. They are seeing the opportunities that Canterbury provides, especially so now with the rebuild beginning to regain momentum. It is my professional opinion that, bar any “major events” Christchurch is poised to begin a huge growth phase, with every indicator pointing to some strong capital growth over the coming years. Certainly worth thinking about and now is the time to take action before we see a hike in property values. The Property Investors’ Association website also makes for some interesting reading.

Struggle to Tackle ‘Property Addiction’

The question remains – have we moved on from our Kiwi love affair of owning our own slice of NZ? Gone are the days of a quarter-acre section, but our DNA makeup remains and appears to be still driving us to secure that patch of real estate we can call our own. While I refuse to get sucked in to the political debate and the regulations inferred, I do think this article in the New Zealand Herald is thought provoking for us hardened property capitalists! Read the article here if you wish. A few snippets:

Figures out this month show national housing values sit only 4.4 per cent below the peak of the boom in 2007.

Major political parties’ lack of policies to redress our love affair with housing has bred frustration in economic circles.

The Reserve Bank says only $24 billion, or 3 per cent, of our household assets are in the form of domestic equities or shares, compared with 73.8 per cent in housing.

While I regard myself as a simpleton when it comes to investment, I can’t help but think that the old adage of “the bricks and mortar that you can drive past, see and touch” frankly takes a lot of beating. Reading through the above article doesn’t persuade me to pull my money out of real estate and invest elsewhere; besides the alternatives are far from convincing and the thought of a “middle man” fleecing your profits or squandering your hard earned cash is far from appealing. Is there really anything “as safe as houses”?

I could go on, but let us know your comments…

All the best as we fast head for December the beginning of the festive season.