We have observed that first home buyers are particularly active in the market. Many have delayed their purchase decisions as they were concerned about job security, house price stability and wanted a bigger deposit to get started with. However, many Hamilton businesses have coped well with the recession and are now showing early signs of expansion. Hamilton house prices have also remained relatively stable over the last four years. Couple this with wage growth and bigger deposits and smart young house buyers are sensing that moving early may avoid pitting themselves in competition with a growing number of young house buyers or investors. If they have done their homework they will also be aware of the low number of housing starts Hamilton has experienced during the last few years. This undersupply of new homes looms as an inflationary threat to house prices.

Of even greater importance to the market have been the types of housing that first home buyers have been buying. Earlier in the year there was a large pool of investment housing bought by first home buyers. Investors were exiting residential rentals to rebalance their own balance sheets and therefore did not buy again. Empirical evidence suggests that recently first home buyers have been purchasing the homes of first home sellers. This is freeing these sellers to re-purchase in the city and create greater momentum through the entire Hamilton real estate market.

Thankfully the Hamilton residential rental market is, by contrast, displaying a good level of consistency – with strong fundamentals underpinning a calm but optimistic outlook.

The most significant examples of the strong fundamentals are the city’s continued, steady population growth, together with increasing employment opportunities. Our strong employment market is driven in large-part by the greater-Waikato’s thriving agriculture (particularly dairy and sheep & beef, including wool) and equine industries.

Occupancy rates across the portfolio are being maintained and sit just above 98% (this has been the case throughout winter).

However, when a property becomes vacant we’ve noticed a drop-off in enquiries to re-let. One of the more interesting trends, backed up by our data, shows that we’ve carried out more advertising this year (compared to 2010), and have taken a greater quantity of prospective tenants through available houses and flats. This suggests that while our portfolio is largely full, there are more empty properties than usual on the market – and tenants therefore have greater choice.

Therefore, in this environment, presentation of an empty property is more critical than ever. In our experience, it is obvious that clean, tidy, insulated properties with modern heating systems will not stay empty for long.

With more choice available the balancing act between increasing rents and maintaining occupancy becomes a fairly delicate one. Moderate increases are being accepted in some areas of the market, but in other parts there is a good deal of price sensitivity. Our team is charged with the responsibility of constantly monitoring market conditions in the bid to improve your rent returns.

Buyers to this point have remained price sensitive and patient. However, the availability of properties under $300,000 is diminishing and this is causing concern for first home buyers who have been fuelling the market’s recovery. Waiting on the sidelines may no longer be a prudent option for those who have been disciplined to this point.

The popularity of suburbs Rototuna, Hillcrest and Nawton continued during July. However, a surge in activity in Fairview Downs surprised the market. Buyers began to recognise the value of the affordable properties with access to open recreation spaces and easy access into the central city or Westfield Shopping Centre.

The top end of the market roared into life after struggling for the first half of the year. There were a mere 19 sales above $650,000 for the first six months of 2011. By comparison there were 10 sales recorded above $650,000 during July.  Highlights in this segment during the month included;

Louis Lin’s sale of a Rangiwari home for $1,000,000

Warwick Johnson’s sale of a Beerescourt river property for $745,000 and

Glenn Collins and Sonia Christison’s sale of a River Road character property for $749,000.

Early indications for August point to a growth in the number of sales as children head back to school and parents refocus on buying their next home.

But just what is a ‘lucrative investment’? Below is the opinion one of Hamilton’s most experienced property managers (himself a ‘perennial investor of 26 years’), David Kneebone, general manager of Lodge City Rentals.

David says while yield is important the true windfall comes when you identify a ‘hyper-growth’ area through solid research, observation, and calculated risk.

David’s investment tactics:

1. Wealth generation is a combination of capital gains and cash flow.
2. You’re better paying fair value in a blue chip suburb than paying less for a property in a suburb that no-one wants.
3. Buy long term – so buy when you can afford to hold on.
4. Invest in expert advice – save on paying for mistakes.
5. Debt magnifies returns: Unpopular today, but don’t confuse debt that used to buy consumer products with debt that is used to generate income. Manageable and prudent levels of debt will leverage your investment returns over time.
6. Specialise in growing your portfolio – thereby growing your wealth potential. Let an expert take care of the day-to-day management.

David has helped a number of investors develop their own criteria for residential investment. If you would like to discuss your entry or expansion in the investment property market, give him a call.

At first glance the median time to sell of 48 days being up on the 38 days at the start of the year might point to market weakness. However, the cause of the blowout is the decline in the number of properties available for sale. The number of properties available for sale by agents shifted from around 1300 properties at the end of March to about 1000 properties by the end of June. Typically, if a property is over priced in a market with excess listings when it is re-priced the market can fail to notice the change in value. It can get lost in the clutter as buyers focus on properties which are new to the market. However, as more properties sell and fewer properties are listed for sale all properties become more obvious to buyers. Hence, when properties that have been sitting for some time are re-priced they get noticed by the market and sell. This elongates the time on market measure yet reflects a recovering or strengthening market.

The change in the market is made obvious in the sales to month’s stock ratio which measures how many months worth of houses are on the market or how quickly the market is selling all the houses available. This has fallen from 8 months in February to 5 months by the end of June. Anecdotally, the market experiences upward price pressure when this measure reaches 3, which if the number of houses listed remained low and sales continued could conceivably occur in the next few months. However, typically the market experiences a surge in houses new to the market in the spring so pressure in the area is expected to ease.

Overall the market is well on its way to recovery. Hamilton’s population continues to grow. People new to the city, first home buyers and investors are beginning to see value, and have confidence, in the housing market.

Rototuna was again the top selling suburb for the quarter although its dominance fell from 16.9% of the market back to 15.5%. Sales in Hillcrest boomed as investors showed confidence in the University dominated suburb moving sales in this part of the city to 9.3% up from 8% for the previous three quarters. Nawton held steady at 7.9% of the market while Hamilton East was kicked along by first home buyer and investor interest making up 7.5% of the sales. However, the suburb shed 5.5% from its median sale price as sales were concentrated sub $300,000. Rounding out the top 5 Dinsdale again proved popular particularly with first home buyers capturing 6.7% of the market.

We expect sales numbers to continue to climb throughout 2011 as the market’s 1400 sellers are freed to buy their next home. There is a distinct shortening of available housing entering the market which is good news for current vendors. This can be evidenced from the number of houses listed for sale on realestate.co.nz which fell from 1320 properties at the beginning of March to be 1207 houses available midway through April. As sales rise and the number of properties available for sale drops there is typically talk of a price recovery. However, the market is acutely price sensitive with buyers opting not to purchase (staying put or renting) if they cannot find the right home at the right price. Therefore, there is some way to go before we expect prices will recover.

The first stage to a recovering residential real estate market is to see volumes improve. This is well under way in the Hamilton market and we expect we will see this continue throughout the year.

Firstly the median is the number separating the higher half of a sample from the lower half. The median of a list of numbers is found by arranging all the observations from lowest value to highest value and picking the middle one.

The median house price is one of the most common measurements used to compare real estate prices in different markets, areas, and periods. It is said to be less biased than the mean (average) price since it is not as heavily influenced by extremes such as a small number of very highly priced homes.

Monthly movements in the median are, however, still volatile. This is particularly true when there are fewer houses sold. When there are less sales the distribution of sales can heavily influence the median from one month to the next. Hence, when considering the median as a guide to price it is more useful to examine the trend rather than comparing one isolated month with another.

The December 2009 and December 2010 Hamilton median price is a good example. In the one month between November 2009 and December 2009 the median rose 6.5%. (shown in the accompanying graph) This was primarily the result of a drop in the relative number of properties sold under $350,000 during December rather than any price movement. During the next few months the anomaly corrected itself and the median returned to almost the identical figure by March 2010. It continued to remain at this median for much of the remainder of the year including December.

To identify the trend it is often useful to average the median over a number different periods in an attempt to understand its trend. When this is done, as is shown in green on the accompanying graph, the comparison between December 2009 and December 2010 shows a very stable median rather than one that has fallen dramatically.

The first trend we have noticed is that buyers are far more informed than ever before when enquiring about a property. Largely due to the significance of the internet buyers now have far more access to information than ever before. They are therefore undertaking more research before contacting a salesperson. Not only are they interested in learning about the property itself they are also interested in the neighbourhood and surrounding values. Suburb profiles are draw-cards for them as are neighbourhood metrics. The more information they can glean about a property the more likely they will confidently enquire about it.

Secondly, the internet is only one source of information. Buyers use a combination of new technology with old style browsing. Lodge has well over 1000 buyers who everyday receive an email alerting them to properties which are new to the market which meet their search criteria. This service is ultra convenient for active buyers. However, our research has shown that properties that have large newspaper ads get a spike in internet viewings in the week after the ad runs. This shows that firstly there are a number of active buyers who still use the newspaper. Secondly it highlights to us that there is a significant number of buyers who are not ‘active’ but are motivated into action when casually browsing the property section of the newspaper. Hence, in this hi-tech world newspaper advertising is still a very important source of enquiry.

The third trend is linked to the lack of time people have today. In a world where often both couples are working convenience and the desire to save time has become a dominant benefit. Tools such as the Lodge open home map or internet tools whereby a custom built open home map can be constructed and optimum route plotted are a necessity for buyers with the means to buy but limited time to look.

Salespeople report that these three trends are having a significant impact on the process that buyers are going through. The buying process is an evolutionary one. Technology is improving the real estate experience for both buyers and sellers. However, it is important to understand the tools that buyers value in order to place your property on their map.

The number of houses sold in December rose for the second consecutive month. The December tally of 175 house sales was 16% higher than the average number of properties sold per month for the previous 11 months. Market volume fell throughout the year to a low point of 138 house sales in October. Since then month on month growth and strong early January enquiry are positive indicators the market is trending towards recovery.

The median number of days a property spends on the market also fell to 38 days indicating a lift in the confidence buyers have in the market.

Hamilton’s median price consolidated at $326,750. The median price has shown volatility during the year trading in a range between $320,000 and $350,000. However, this was a side effect of the unusually light volume of sales throughout 2010.

As could be expected in a stronger selling month the number of properties available for sale fell. However, the number of properties entering the market in early January would suggest this may have been caused by the shorter month rather than by the higher sales.

The outlook for 2011 is for sales volumes to continue building. Whilst it may be some time before we see price increases the old adage that price follow volume still haunts our thinking.

The table below graphically illustrates the market’s demise:

Although for much of 2010 we witnessed market conditions deteriorate October was the bottom. Since then we have seen a strong recovery in November followed up with even better sales activity during December.

Our outlook for 2011 is for volumes to continue increasing throughout the year. Our reasoning is based on the following;

• Hamilton’s population has maintained its growth up 1.7% for the year.
• Rental demand for accommodation is consistent with some sectors lacking properties to rent. As tenants become frustrated with the lack of choice they can often turn their attention to purchasing.
• Business activity has lifted and Hamilton businesses are producing good wins. A prime example being WEL Networks $300 million broadband build contract.
• Providing the rain outside my window continues farmers will benefit from an increase of 30c per kg of milk solids taking the payout into the region of $730 – $7.40 before retentions.
• Finally, the rugby world cup will add stimulus to the entire country. However, it could also attract immigration as scores of northern hemisphere tourists sample our unique lifestyle first hand.