to Valu in Review for May (and the beginning of June) 2005. This is a summary of news articles in the press over the last month. We hope you had a great break and that you now….

Read, learn, enjoy ..

.. and happy investing!
 

House sales in April (8,876) were down from April last year by 7.5%. They were also down by 20% from March. The median house price also fell to $272,000 (down 3% from March).

Statistics released by QV show that house prices increased 12.5% for the year ended April 2005 for all of NZ

In April the Reserve Bank released its bi-annual Financial Stability Report. The report is a review of the financial sector. Overall the financial sector is in good shape. However, Dr Bollard did note concerns in relation to higher household debt and the riskier lending by banks – especially if there was a downturn in the economy. Household debt in the last year has increased by 15% to the highest levels ever. Of all household borrowing 90% is mortgages. When the debt was compared to household income (1. debt to disposable incomes and, 2. Ratio of debt servicing costs to disposable income), both have increased into “uncharted territory”.

The AMP home affordability survey for the quarter ended March indicates the biggest decline in affordability for 9 years. It became less affordable to buy in all regions other than Auckland, Wellington, Nelson/ Marlborough and Southland.

Net migration fall in April. The net annual inflow has decreased to 9,350 (42,050 April 2003). The average annual inflow for the last 11 years is 13,500.

Building consents were down in April. Market commentators believe this was due to a rush in March to beat higher consent fees and new building laws. Although down, the drop is bigger than many expected.

The Official Cash Rate was left at 6.75% at the start of June.
 

The Commerce Commission is recommending that people entering into these schemes get full legal advice. Many contracts that are used in these schemes meet the definition of a consumer credit contract under the new Credit Contracts and Consumer Act.
 

Depreciation. See separate item in this newsletter

Other changes announced were:

Government subsidy of up to $5,000 per person for first time home buyers through a new KiwiSaver scheme (4% of annual income for a minimum of 3 years). Couples will be able to combine their savings but their total income must be less than $100,000. They must also be buying houses in the lowest ¼ price bracket of the sales in their region. It will be 2010 before the full impact of the scheme takes effect. The Government estimates 3,000 people per annum will use the subsidies.

Mortgage Guarantee scheme. The income limits have increased. For 1 or 2 borrowers it is now $85,000. 3+ borrowers is now $120,000. It can now be accessed via banks other than Kiwibank.

An additional $134m will be spent on 1,300 new state houses over the next 4 years.

The Department of Building and Housing receives an additional $22.6m primarily for the weather tight resolutions service but also to provide advice to landlords and tenants.
 

Research undertaken for a mortgage insurer has indicated that rents will remain relatively low throughout the country and are falling in Auckland. The research found that landlords were turning away from the Auckland market due to a shortage of tenants (although it did not mention if it was specific in regards to what type of dwelling apartment v house or age of dwelling).

If interest rates fall then it is predicted that house prices will once again surge.
 

New drinking water standards are due to be released in June or July and set into legislation later in the year. It is estimated that 1.1m people in NZ source drinking water from sources that did not meet the minimum health standards. The new standards will force many small towns and rural areas to increase the quality of water provided . They will have a number of years to meet the new requirements. This could mean additional costs to smaller communities as they upgrade their facilities. Local authorities will be required to take all practical steps to ensure that the water provided by community schemes meet the new minimum standard.
 

Housing NZ has leased 117 apartments in 5 central Auckland blocks. The apartments are either 1 or 2 bedrooms and the total leases made up less than 30% of any individual block. Of the 1,723 leased properties across Auckland, the apartments made up 7%.

Auckland City Council is tightening up on it rules in regards to urban design rules, to stop “ugly” buildings being constructed. The new rules take effect from 1 July 2005.

Minimum apartment sizes have also been introduced by the Council. New minimum sizes are Studio - 35 sqm, 1 Bedroom – 45 sqm, 2 bedroom – 70 sqm, 3 plus bedroom 90 sqm.
 

A street that has earned itself a bad reputation, with a gang influence that no longer exists, still has a stigma attached to it. Investors have asked the council to change he name of the street to encourage investment and families into the area.