Monthly Archives: May 2009

Rent or Buy – Question or Game?

Deal or no Deal?

No, not really.

Surely to enable you to sleep at night it should only ever be a decision based on your own current or foreseeable fiscal situation.

What wasn’t surprising in the report today, was that the usual suspects, Central Otago Lakes (aka Queenstown), BOP / Tauranga, etc, and Nelson were back again. (The report said it took 33.4%, 25.2%, and 26.4% respectively of a monthly income to service their quoted mortgage.)

The article also quoted the big smokes of Auckland and Wellington as places were they thought it was still better to rent than buy.

Why do I get the feeling the media seem to be treating this like its a game, take a bet one way or the other.

Its definitely not.

Speculation is still out there no doubt, but with so many players, bargains are certainly thin on the ground in the places mentioned above. And there might be other factors at play.

After looking at the below chart for our region, you might be interested in revisiting this piece (& comments here) of a more general NZ nature penned back in March this year.

In all of this we only get snippets or minor comments about observations re the social or psychological effects instead of just the more obvious financial ones.

In that vein, in the article today Bob Hargreaves, the resident property expert over at Massey University in Palmerston North touches on it by saying that overseas studies indicated the stability of living in one place appeared to benefit youngsters of home owner’s more favourably than renters.

Whats he talking about?

Well in a nutshell, studies like this indicated that academically math achievement scores of owners’ children were about 9 percent higher than renters’ children, while reading achievement scores were about 7 percent higher.

Controversially back in 2003 Harkness and Newman’s study for the Journal of Housing Research demonstrated that renters’ children are 40 percent more likely to give birth as an unmarried teenager than owners’ children.

And as The Economist ( Shelter or Burden? April 16th 2009 Edition ) put it recently

Still, on balance, home ownership gives people a stake in the state of their surroundings. Thriving streets increase the value of properties, giving owners incentives to improve them further. Renters get no such benefit; they may even have to pay more if the neighbourhood improves.

And back in 1987 sociologist George Galster published this, “Homeowners and Neighborhood Reinvestment.” Amongst other things George contends that owned homes are likely to be in better physical condition, one of the reasons being its more probable that home owners will invest in the quality of their dwellings.

Another US study showed children of homeowners (US study it was) were 116 percent more likely to graduate from college (University in NZ).

So its would appear there is quite obviously a lot more to it than just rent or buy, especially in terms of family or lifestyle.

Could underlying social and family reasons be perhaps one of the reasons why certain parts of NZ are dearer to purchase a home in than other, and therefore, based on the articles assumptions, remain cheaper to rent in than to buy.

Food for thought?

A contrarian view can do great things for your comment stream?

How much can a Farm Tractor really be worth?

Well, courtesy of the internet and the Trademe auction site , it could be said we town folk have got more of an idea these past 2 weeks of the value of a tractor, surely more than its start price of $1 though.

Growing up the only name I knew was Massey Fergusson.

Those cold hard tractor seats at the local playground had the name mentioned around them. Even in its infancy, and even in provincial NZ, corporate sponsorship was making inroads then!

Today, courtesy of things like Discovery Channel we learn about the others, names like CLAAS, IHC John Holland, some big CASE units, John Deere, amongst others.

And so it was, last week the NZ media did have a bit of a field day when an auction was held as follows…

Buy a Tractor and get a 20 acre (or 80937 m2) farm for free…

with the following result…..

which, surprise, surprise (well its not everyone that places a bid for $250k is it?, last time I looked that wasn’t the available credit balance in my bank account anyway) eventuated in the buyer not being able to complete the sale.

In fact it was almost pretold here on this website that this sort of outcome was the most probable, and not exactly unexpectable (even though, after 2 confirming phone calls from the auction site representatives to the leading bidder thought otherwise…..pertinent piece mentioned here in the last comment of this article).

So guess what happens the next week …..deja vu!

Only this time, its in our region, the Top of the South, and a local entrepreneur decides to follow up the idea by going down the “tried and tested” tractor path, only this time, as you can see from the photo, the tractor pictured looks just a bit different.

Well there’s no reason to give away a full blown real tractor now, is there?

The result so far…….

With the developer turning a Nelsonians Eye, and much to the ???? of previous purchasers in this same subdivision who originally paid amounts over $100,000 for their similar sized sections, it looks like the new buyer will, on current bids, quite possibly bag a bargain. All I can say is, Good Luck in the bidding.

Low Housing Consent tally for Nelson

Statistics NZ have just published the latest housing consent numbers, up to April 2009.

Although Napier & Northland seem to be on a bit of a roll, all other regions in the main have reported much lower consents than 12 months ago.

Although noting that the overall declining trend is abating, they point out that consents approved for April 2009 (excluding apartment units) show the number of new housing units to be at a very low historical figure.

You’ll notice that the above graphic excludes apartment sales, and even though this part of the mix was a standout compared to the 2008 consent numbers it wasn’t really that relevant in provincial regions.

Statistic NZ said as much in the article

Movements in the regional results for the monthly series should be treated with caution.

There were a high number of apartments authorised in April 2008, which was the highest monthly total since March 2005. The regions most affected by this were Auckland and Wellington.

The low levels reported today are the lowest since they began tracking dwelling consent approvals back in Jan 92, and furthermore, that since mid 2007, they have overall fallen back by about half.

SOURCE – Statistics NZ

NZ about middle of the pack

Knight Frank have just released their latest Global House Price Index, this one covering Q1 2009.

It shows NZ’s performance in the house price movement as about middle of the pack and certainly not as volatile as others.

In fact if you go to the report on their site here, you’ll see the Qtr on Qtr figures and in many cases they make for somber observations.

For many ex-pat Kiwis they may reconsider their current property investment strategy, and ponder whether the home grass is definitely greener than where they are now.

In slightly related news, Australian serviced office company Servcorp has just published the results of a survey 7500 international business folk from 24 nations. They asked them to identify which countries they believe are surviving the crisis the best, with the outcome that our cousins across the ditch topped the poll. NZ was 9th.

And as a Nelsonian…..well in Nelson, we too are middle of the pack as far as NZ is concerned. The latest REINZ compiled data shows that our region has tracked closer to the NZ median for the past 12mths than any other region in the country….more evidence of our stable local regional market I would say.

KNIGHT FRANK SOURCE DATA  Nick Barnes, Residential Research, Knight Frank / Niki Riley, Press Office, Knight Frank

Nelson – brief snapshot on Nelsons Population

As can be seen from the below graphic Baby Boomers will continue to make up a larger percentage of our population for the next two decades at least. (Data from 2006 Census)

On the whole our population is not expected to grow by more than 30 ~ 40% (in a best case) or by no more at all in a most bearish view forward.

With the amount of boomers retiring, normally or earlier, and alongside the growing movement towards seeking out a fulfilling lifestyle pre-official retirement age, I for one find it hard to believe that locally our population won’t increase considerably, and spill over into the neighbouring Tasman District also.

Take for example the Ernest Rutherford retirement home which started selling its stand-alone 2 bedroom brick townhouses (still part of the overall complex) at the beginning of 2008 and now just over a year later is nudging the order book on number 90 of those units. (original plans were for just 64)

As can be seen here, the overall trend is towards an aging population locally, although as the top chart shows, the 40-54yr category also displays an increase, although not as prominent as the more senior 55yr+ age group sector.

One could suggest that after recent events of the past decade or 15 years, the Share Market, Internet, and Property bubbles so to speak, that an aging population have decided to consolidate their wealth in property, and certainly there’s no shortage of anecdotal evidence in NZ that may suggest just that.

In fact after reading that potentially 30% of retirees from certain countries have no nest egg left, and have everything tied up in their personal home, is it any wonder the continuing fascination with property. And for many, they may just find that the grass is no longer greener financially offshore.

Continuing in the theme of many NZ provincial towns, we see an exodus of young folk either just entering the workforce, or those moving away to attend university / higher educational institutions, and in many cases then going on to seek work in the bigger cities here and overseas. However one thing that is quite apparent on the above graphic is the reasonably large percentage of our local populace in that 40 year old age group category.

For many in this age group (40’s category) the realization of life values, whether because of their older siblings / parents or children of their own, starts to become a more important element of their human makeup. I believe this goes partly to help explain our regional populace age makeup, and certainly partly explains why our region is a drawcard for those seeking to discover those values.

Further on the exodus of younger folk, examine and compare the chart above to this one of Auckland below.

Good thing is, courtesy of Statistics NZ you can visit the site mentioned in the SOURCE link below, download the excellent Excel spreadsheet and conduct data analysis on your own region of NZ if you want.

SOURCE DATA – courtesy of Local Population Trends Spreadsheet here at Statistics New Zealand