August 2011 - Housing Stock in Short Supply

Market Comment

“Across the wider Auckland area values have increased 2.4% since January, and as a result are now 1.9% above last year and only  0.6% below the previous market peak of late 2007. This growth in values over the past few months has not been evenly spread across  the Supercity with the old Auckland City growing the most, modest increases in Rodney, North Shore and Waitakere, while Manukau,  Papakura and Franklin have stayed more or less stable” said Ingerson.

Wellington Region Market Snapshot

QV’s Residential Price Index for June shows that property values in the Wellington region are 3.3% lower than the same time last year,  with values off 1% since January. Mr Kerry Buckeridge of QV Valuations said “the Wellington market has continued to be quite subdued  overall. Over the last couple of months we have seen low activity levels and values continue to trend downwards. There is a seasonal  influence, in winter we typically do see less properties listed and less sales activity” Mr Buckeridge said.

Wellington Snapshot

QV’s Residential Price Index for June shows that property values in the Wellington region are 3.3% lower than the same time last year. Values continue to ease downwards.

Wellington Rental Trends

Trends in the capital have been variable over the past year, but by June 2011 the average rent was 0.3% higher than 12 months earlier.  Some upward pressure on rents early in the year took rental yields to their highest level in almost seven years. Unlike most other  regions, Wellington didn’t suffer from a significant fall in new tenancy agreements over the last year, suggesting the supply of available  rental property remains relatively high.

Down on the Farm

Farm prices have fallen to the lowest level since 2003, says the Real Estate Institute of New Zealand. The median price per hectare for  all farms for the three months ended July was $14,649 ‐ compared to $17,901 in the same period last year the lowest point since September 2003, the institute said.

Looking Ahead

House prices could increase by 12% over the next three years, a mortgage insurer says. A report into the country's housing market,  released recently, finds a shortage of new housing is driving property values up. Conducted by Infometrics for Australian mortgage  insurer QBE Lenders' Mortgage Insurance, the report also highlights that the median house price has edged up to $356,000 ‐ an  increase of more than 1% in the past 12 months.

ASB Investor Confidence Survey

The popularity of rental property as an investment took a dip in Auckland, bucking the nationwide trend, though it still remains Kiwi’s  second favourite type of investment, according to the latest ASB Investor Confidence Survey. The survey found investors view rental  property as the second best value investment behind term deposits, up one point to 16%. Outside of Auckland rental property climbed  three points to 16%, however within Auckland the popularity of rental property fell from 19% to 14%."This could be due to changes to tax  on property investments announced in Budget 2010, which came into force on April 1, 2011," said ASB head of private banking and wealth management, Jonathan Beale.

Tax

Government tax changes have hit landlords’ future cash flows and left investors requiring a higher yield from their properties, according  to the Infometrics New Zealand Housing Outlook report. The report claimed the removal of landlords' ability to treat the depreciation of  buildings as a tax deductable expense has prompted a focus on property yields to improve cash flow. "As a result, investor demand for  property has been reduced and, in some cases, owners of rental property have been looking to reduce their holdings."

BNZ‐REINZ Residential Market Survey

The housing market is in the early stages of an upward leg as growing numbers of first home buyers enter the market while increasing  numbers of investors appear to be leaving it, according to the latest monthly BNZ‐REINZ Residential Market Survey.

Interest Rates

It's the age‐old question for borrowers: fixed or floating?

At a push, Bank of New Zealand chief executive Andrew Thorburn still thinks a floating rate mortgage is the way to go. "In my view, it depends on how quickly interest rates rise, so that is the key, and importantly whether New Zealanders believe that we are going back to   much higher interest rate and higher inflation environment," Thorburn, a trained economist, said.