Is NOW really the best time to buy?
Its the topic on everyone’s lips this week, at the petrol station, at the coffee shop, at the local council, at New World Supermarket, etc.
We have heard Tony Alexander, the BNZ’s chief economist chip in with the following advice…. “buyers should be seeking a mortgage interest rate of 5.5% fixed for five years.”
However almost in the same breath he makes the following comment…
“but as I wait for this rate, I’ll become increasingly prepared to accept something just below 6% just in case the world suddenly looks like a brighter place”
I remember being told back in October last year if you can get a fixed rate in the low 6’s go for it, don’t hesitate. So I’m watching with baited breath to see what the outcome for 3 – 4 – 5 year fixed rates will be after RBNZ’s March 12th OCR annoucement. And only then will some Kiwi’s find out if they missed the boat while it was in port.
Someone commented this week that we are near the bottom on these fixed rates, so time will tell if they’re right. However I can tell you there are plenty of signs that buyers are now actively taking advantage of these lower interest rates. (check out this weeks Summit Weekly Comment here)
The NZ Herald reported Wednesday, (as Alistair has commented on along with some informative graphs, over at Unconditional Blog) that Robert Mellor, managing director of BIS Shrapnel, reportedly said “prices in the Auckland housing market will bottom out by May this year, and should return to growth by 2010.”
In Australia BIS Shrapnels Dr Gelber has been much bolder regarding his own home market ….“Meanwhile, we’ve seen the bottom of the residential cycle, the next stage is an upswing, probably next year, building momentum into what will become a boom.”
And in continuing info that could rebound on Kiwi’s that have crossed the ditch…Dr Gelber states….
BIS Shrapnel notes Australia would normally see a quick rebound as lower interest rates pump income into the mortgage belt, confidence recovers, undersupplied housing markets rebound and households start to spend again, particularly with the government cash injections.
“But this time, weak exports, the fall in commodity prices and the shock to demand have hit the financial viability of projects,” he says “Meanwhile, the continuing credit squeeze and constraints on equity funding mean there is little finance available for new projects. And that has slaughtered business investment.”
The company notes property development has already been hit. Minerals investment will also fall sharply – BIS Shrapnel’s current forecast is for a fall of 50 per cent, with the possibility it could be worse.
I feel some of those items ring a bell here too.
However, even with the aid of historical data / trends, and computer modeling, forecasting is still a prediction business after all.
Many Kiwi’s who went searching for big money mining jobs may not find the grass over in OZ greener this year. I’ve previously posted on this general theme here & here.
The NZ Herald also quoted Property author and advocate Kieran Trass as saying;
“Auckland flats are the first category of property this decade to emerge as cashflow-positive – paying you to own them – because of interest rates and property prices.”
In the same article Strategic Risk Analysis economist Rodney Dickens, of Whangarei, chipped in with “the market was eroding the benefits of renting a house, and it now made more sense to buy.”
Although on the supply side the numbers are not stacking up positively for buyers looking for new builds, especially so locally.
Statistics NZ report…
Residential buildings contributed 48 percent to the total value of all buildings in January 2009, while non-residential buildings contributed 52 percent. This is the first month since June 1998 that residential buildings have contributed less than non-residential buildings.
And just to place consents into perspective, they say “The seasonally adjusted number of new dwellings authorised, excluding apartments, fell 8.2 percent in January 2009. This series has been falling in recent months and is now at its lowest level since the series began 17 years ago.” …… and …….”812 new dwellings, including apartments, were authorised, the lowest recorded since this series began in April 1965.”
Its interesting to note on the above chart the incredibly low consent rate for Nelson in Jan 2009, with Tasman not exactly setting the world on fire either.
Certainly with the stricter lending policies from the banks, coupled with stronger adherence to tighter LVR levels, there is the possibility that extra pressure may come to bear on existing housing, particularly in the Nelson region, less so in the Tasman district.
I cast my mind back to the end of the 80’s when I was paying 19% interest, and the concern that it was a stretch for a one income family then. Fast forward to the 2000’s and it’s almost a given that any younger couple moving into a newer home are banking on dual incomes to pay off the mortgage. Back in the 80’s it was possible for the other partner to find employment or even for the one income earner there was the possibility of a secondary job.
I do not think that type of opportunity will present itself this time around. Frankly its quite obvious that a 6% rate over 5 years is still a pretty decent base from which to conduct long range budgets on.
Undoubtedly all of this hinges on employment, and our own NZ Realtors partner in Auckland, Barfoot & Thompson, said through director Peter Thompson, when speaking to the NZ Herald, the following advice…….
* Be cautious about borrowing – don’t get a loan for any more than 85 per cent of a property’s worth
* Fix a mortgage for the longest-term possible, up to five years if you can.
* Don’t over-commit – buy in an affordable suburb then move to your “wish suburb” a few years later.
Speaking with a lender earlier in the week, it was indicated that the other brokers from his company all had each, on average, over 30 pre-approval certificated buyers running around in the region, and based on that, definitely also have intent.
In summing up, the best words I read this week came from that BNZ man again, Tony Alexander when he said..
“As long as I figured on keeping my job I would be out there actively looking for a property at the moment,”
SOURCE – NZ HEARLD / Statistics NZ
February 27 2009 05:59 pm | Buyers and Mortgages Finance Money and Nelson
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andy hamilton on 27 Feb 2009 at 9:52 pm #
Unemployment will be the principle driver of the housing market in NZ as the global depression deepens – unemployment will go MUCH higher than the pundits are predicting (10% plus). Its very noticeable here in Nelson how the jobs section on a Wednesday and Saturday in the Nelson Mail has collapsed in volume – and low and behold the Nelson Mail report 30 local jobs gone this week alone:
http://www.stuff.co.nz/nelsonmail/4862582a6007.html
Max Percy on 28 Feb 2009 at 1:13 am #
If you mean is it really best to buy now meaning prices have bottomed then I would say a resounding NO.
On the other hand ask yourself this “will you the reader be able to recognise when the prices for housing has bottomed”
My answer to that is you wouldn’t have a show in hell and in the off chance you did get it on the button it would be more good luck than anything else.
The so called experts, economists, bankers, governments and so on couldn’t get it right about the property bubble bursting so i personally don’t hold out much hope for them or anyone else getting the ” bottom right”
Look if you are in the market to buy then just get on with it. So what if the property market bubbles around during 2009 and beyond.
If you as a buyer play the waiting/ guessing game then you stand to fall into that category of non buyers. You know the ones. The couldv’e done, shouldv’e done, wish I had done!
The time we will know the bottom has been reached is only when it is on the rise and it will sneak up on most of us and the ‘bottom will have been missed.
David Leggott on 28 Feb 2009 at 6:58 am #
Andy
Also in yesterdays paper, quoting Judy Fanselow of one of our largest recruitment agencies Fanselow Bell “We’re well-placed to ride our way through it. The world still needs food and timber”
However its a given that because in the period Feb thru May generally, we have a large increase in employment courtesy of the our regional seasonal industries, it could be said we may not see trend signs til mid year locally.
David Leggott on 28 Feb 2009 at 7:10 am #
Re the Nelson Mail article about “Jobs gone”…while Goldpine and QV mentioned job losses/redundancies, Mastertrade chipped in, quoting an anonymous staff member as saying they were merging with another electrical business, and as a result, one site was going to close with the loss of 6 jobs. Well that’s just business, and those job losses are part of a business process, happens all the time, in good times and bad. Houston Motors, our local Mercedes, Dodge and Mitsubishi agents, said some staff had left and were not being replaced, technically “jobs gone” but different from a layoff.
David Leggott on 28 Feb 2009 at 7:17 am #
Max
Pretty well put, and rest assured once things start to pick up and you read about it, then by that time the bargains / good buys will have gone, snapped up by those seeing, and already reacting to the signs out in the marketplace, “on the ground” so to speak, not waiting for the mainstream media to tell you its NOW the right time.
Remember what Louis Pasteur said…..
“Chance favors the prepared mind.”
Peter Driscoll on 28 Feb 2009 at 2:21 pm #
great post Dave really enjoyed it
andy hamilton on 28 Feb 2009 at 5:49 pm #
David
I am sorry but Judy Fanselow is clearly talking her book – just look at her comment about timber for example. What is timber used for? – principally in building in NZ and abroad (and of course paper etc). Now you would have to be some kind of idiot to not realise that NZ building demand for timber is through the floor (where did all those building consents go – oh yes I remember a record low last week). No new houses, no new kitchens, no new decks etc etc. As for abroad – well our export markets in Asia are collapsing, look at the implosion in the Japanese and Korean economies for example, (and paper demand is getting massacred as the newspaper industry takes a hammering as well – all those job adverts no-one is placing anymore). For goodness sake its only 4 weeks ago that Nelson forestry said they were laying off workers (http://www.stuff.co.nz/nelsonmail/4824465a6510.html – it ended up being 30 redundancies) and this woman comes out with this nonsense? Zero credibility.
Just look at the huge number of commercial listings your company (and all the other RE agents) have David – pages and pages of them, which exactly matches the ‘for lease’signs that have sprouted all through town – jeez on one half of Bridge street (for those who dont know one of our major shopping streets), there are 4 vacant shops alone. Twelve months ago you would have been hard pressed to find a single vacant retail premise in the WHOLE Central city! (and I see Splendour Home Furnishings in Tahuna joined the exodus today).
Finally today’s Mail has what I reckon is a record low for Saturday job adverts – barely 2 pages. I noticed Ms Fanselow didn’t mention tourism – it must have occurred to even her that this industry (one of our biggest money spinners) is in the process of getting hammered (just look at the fall in foreign tourist numbers reported last week – and these were from booking made BEFORE everything went globally pear shaped)
The writing is on the wall – and quite frankly maintaining this front (in the face of pretty overwhelming evidence) that somehow Nelson has something unique about it will do great damage through instilling complacency. Six months down the line I don’t want to hear locals bleating ‘how could it have got so bad, why didn’t anyone warn us, some one should bail us out as this was all so unexpected’.
David Leggott on 01 Mar 2009 at 12:51 pm #
Andy
Points are noted, but one must not forget our reputation with non-locals as a place to live or retire to. According to many that has its own set of factors plus and against. However it can’t be denied that Nelson is a unique spot.
Even the Topography suggests so. Te Ara – the Encyclopedia of NZ, says… *New Zealand also has many microclimates within the regions. For example, Nelson (at the top of the South Island) is unusually warm because it is protected by mountain ranges to the south and west.*
And coastal, well Nelson officially tops NZ on that one too, with 99% of the population living with-in 5km of the coastline!
So, along with many other factors, I do think we are unique.
If I am taking the “unique” you mentioned out of context, in case you were relating it more to the global / NZ financial issues that specifically relate to umemployment, then its quite plain to see that many experts don’t even get that right.
There are plenty of positives out there still, and with the advent of the instant media that the internet provides, thank goodness many people don’t take a news-paper article, TV News item, blog post at face/first value anymore. More especially if its relevant to them making a wholesale lifestyle life changing event. Now its easier than ever to conduct their own active research.
In that vein, if I were the head of a family wanting to relocate to the Top of the South, then you would be a looney to just show up with the family, expecting easy access to rental accommodation, get the kids into the school you want, land a job on Monday, and then one for your partner on Tuesday, and then find your dream home with-in your “budget.”
This is fundamentally one of the best things about the internet don’t you think?
People can see, read or hear info they want/desire to know, then dissect it, research for confirmation, google for the subjects social acceptance / use / endorsement / history. Then armed with way more info than our parents had, make an impartial / educated decision that’s usually backed up by that individual’s confirmed data / numbers.
According to any local economies place in time, provincial “visitor based” ones seem to experience higher tides and lower tides than the norm, or sometimes they get moderately “buffered” from all that’s happening around them.
And so what box does Nelson fit in?
Only time will tell.
Unsure what you mean when you say “will do great damage through instilling complacency”?