Nelson / Tasman Real Estate Prices

Questions of late have contained one common thread, do I hold off buying, will Nelson prices drop by 30%, etc, etc, etc?

See if you can spot a pattern below, and make up your own mind?

from December 2007

from March 2008

surprise

from July 2008

surprise surprise

from September 2008

and the following delivered in a speech by Reserve Bank Governer Dr Alan Bollard to Property Council of New Zealand in Rotorua in September 2004 makes interesting reading in 2008

…….The housing markets in some parts of the country where such activity was prevalent a year or two ago, such as Nelson, appear to have been cooling recently. The significant rise in house prices in these regions following a surge in demand, coupled with the stronger New Zealand dollar, has presumably dampened overseas investor enthusiasm to buy such properties. However, by all accounts, Australian investors are still active in purchasing New Zealand properties at the moment.

and in a section titled Financial System Stability, in 2004 he said….

Although the possibility of falls in house prices at some point in the future is something investors in housing need to be wary about, the Reserve Bank is also interested in what the consequences of a widespread fall would be for the stability of the banking system. More generally, we are also interested in the potential stability implications of a significant change in values for other types of property such as commercial or rural properties, against which the banking system extends significant amounts of debt.

Last year, New Zealand participated in the International Monetary Fund’s (IMF) Financial Stability Assessment Programme (FSAP). In preparation for the FSAP, the Reserve Bank, in conjunction with the major banks, examined the potential vulnerability of the banking system to a significant fall in house prices combined with a marked rise in unemployment.

One aspect of this exercise was to look hypothetically at what might occur if house prices did fall substantially and if the unemployment rate increased sharply, given current lending exposures. The exercise assumed movements that were extreme, but by no means implausible, by international standards.

I am pleased to say that the results of this stress test were favourable — the banking system itself appears well placed to withstand a marked fall in house prices and an associated deterioration in the labour market should these events ever occur. In part, this reflects measures banks have taken to effectively insure themselves against the risk of default on housing lending. Of course, on matters related to financial stability there’s never room for complacency. Moreover, this positive finding does not remove the onus on individual households and investors to be careful. While the result of the stress test does give us a measure of confidence in the likely resilience of the banking system to a marked fall in house prices, some individuals could nevertheless be hurt if such a scenario was to eventuate.

As part of the same exercise, we also examined the possible effects of a sizeable fall in both commercial property prices and corporate earnings for the banking system. Once again, this exercise suggested the banking system is well placed to absorb such a shock. And again, this positive finding does not remove the onus on commercial property investors to exercise appropriate care as they go about their business.

….interesting in 2008 I say. However here again is mention of Nelson already cooling while the rest of the country got its boom underway.

below comments are courtesy of Landlords.co.nz (9th Oct 2008)

(link – http://www.landlords.co.nz/read-article.php?article_id=3325)

Future outlook

Looking ahead to the future, local body leaders are upbeat about the region’s economic prospects. Tasman Mayor Richard Kempthorne says the lowering of the exchange rate is a positive sign for key industries in the region such as horticulture, fishing, forestry, and tourism.

Aldo Miccio, who has the economic development portfolio on the Nelson City Council,
says a planned performing arts and conference centre in central Nelson will bring in more visitors and boost the local economy.
He adds that the region’s population is predicted to keep growing steadily. Figures prepared for the Nelson Regional Economic Development Agency estimate that the current population of 90,000 will grow to at least 110,000 by 2026.

Infometrics managing director Gareth Kiernan is a little more circumspect with his economic forecast. Kiernan says the slowdown in the property market and service sectors such as retailing will limit economic growth in the short term.

However, in the medium term, Nelson’s importance as a service hub for the top of the South Island will continue to grow, he says.

Kiernan adds that while property prices are expected to drop throughout the country over the coming year, they may not drop as much in Nelson as in other regions. This is because the Nelson market slowed quite markedly after the 2002-04 boom.

“Sales volumes in a number of other South Island provincial areas rose pretty consistently between 2002 and 2007, so those regions are now feeling the full brunt of the downturn, whereas Nelson experienced something of its own individual correction back in 2004,” he explains.

“Plus population growth in Nelson is still reasonably good, so the region can absorb some oversupply of property.”

Long-term investors such as Morris, however, aren’t too concerned about short-term trends.

“I’ve been a landlord now for 20 years and I’ve seen the doom and gloom of the late 1980s and then the late 1990s, and the boom of 1993-94 and 2002-04. We’ve had ups and downs, but we just carry on,” he says.

Facts and figures

Population: Estimated at 90,500 in June last year. Between 2001 and 2006 the population grew by 3.2% in the Nelson city area and 7.9% in the Tasman district.

Population make-up: The median age in Nelson is 39.4 years and in Tasman 40.3 years. The national median is 35.9 years.

Homeownership: In Nelson, 57.4% of households own their own homes and in Tasman 62.7%. The national figure is 54.5%.

Income: Average weekly income $646 (Nelson, Tasman, Marlborough,West Coast – June 2007)

Unemployment: 3.7% for the March quarter (Nelson, Tasman, Marlborough, West Coast)

Source: Statistics New Zealand

Should I do something now?

…perhaps the following from a colleague up north (thanks Ross Brader from Pt. Chevalier) who posted this on his blog, is worth pondering ……….

PROCRASTINATION

I hesitate to make a list
Of all the countless deals I’ve missed
Bonanzas that were in my grip
I watched through my fingers slip
The windfalls that I should have bought
Were lost because I over thought
I thought of this I thought of that
I could have sworn I smelt a rat
And while I thought them over twice
Another bought them at that price.
It seems I always hesitate
Then make my mind up much too late
A very cautious man am I
And that is why I never buy
A corner here, ten acres there
Compounding values year by year
I chose to think and as I thought
They bought the deals I should have bought
The golden chances I had then
Are lost and will not come again
Today’s I cannot be enticed
For everything’s so over priced
The deals of yester-year are dead
The markets soft – and so’s my head
At times a tear drop drowns my eye
For deals I had but did not buy
And now I wish the words I pen
IF ONLY I’D INVESTED THEN

Written 1917, by Marion Morris