 | Welcome |
| | to Valu in Review for September 2005. This is a summary of news articles in the press over the last month.
Read, learn, enjoy ...
... and happy investing!
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| Median Days to sell. |
| | The latest figures from REINZ for the month ended August 2005. National Figures: | Aug 04 | July 05 | Aug 05 | Year on Year | | Median Selling Price | $248,000 | $280,000 | $290,000 | + 17% | | Sales Volume | 8,143 | 8,213 | 8,537 | + 5% | | Days to Sell | | 31 | 29 | |
Of the 12 Regions the following experienced an increase in the median selling price; Northland, Auckland, Waikato/ Bay of Plenty/ Gisborne, Hawkes Bay, Manawatu/ Wanganui, Wellington, Canterbury/ Westland. Nelson/ Marlborough, Central Otago Lakes, Otago, Southland had a decrease in the median selling price. One district, Taranaki, did not change.
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| Economy. |
| | The economy continues to march on strongly. Economic Growth (for the quarter ended 30 June) was up 1.1%. Ahead of what many economists predicted but does make for a reducing annual average growth rate.
Annual Average Growth Rate:
| June 2005 | 3.1% | | March 2005 | 3.8% | | December 2004 | 4.4% |
One of the big drivers in increases is normally investment in new housing. However it was down in this quarter. While the growth was slowing it would still have an inflationary effect. Imports continue to outweigh exports. At the end of August, NZ had a record trade deficit for any month of $1.1 billion. This was driven by increased price and demand for fuel and consumer spending. Exporters are also hindered by the high value of the NZ dollar. For the year ended 30 June the current account deficit is $11.89 billion. The worst it has been since the 1980's. Currently NZ households have a savings rate of -10%. For every $1.00 they earn they spend $1.10. The Official Cash Rate ("OCR") was left "as is" at the review on 15 September. Inflation is expected to now reach 4% next year. With an increase in inflation predicted and growth still relatively high some economists are picking an increase in the OCR at the next review. NZ has the highest OCR of any country in the developed world at 6.75%. Next review of the OCR is 27 October 2005 (then 8th December). For the year ended August 2005 the net migration was 6,618. This is down 65% on the previous year.
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| Mortgage Rates. |
| | Some fixed term rates are now over 8%. It is possible that the popular term of 2 years may also be over 8% by the end of the year. Many banks are starting to increase rates in anticipation of an increase in the OCR at the end of the month. It is believed that approximately 75% of all mortgages are now on fixed terms.
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| Riskiest Place to own rentals. |
| | Research under taken by Massey University indicates the riskiest places for rental property is Auckland and Wellington. At the other end of the risk spectrum is the Hutt Valley.
The research found that the average rate of return from Lower Hutt was only slightly behind Auckland but the risk was less than half.
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| Dropping Rents. |
| | The research from Massey University also showed that there now appears to be an over supply of rental accommodation available. This has resulted in landlords reducing rents to ensure cash flow. The national median rent is $250 which is basically the same as last year. Figures quoted in the research are as follows: | 2004 | 2005 | | North Shore | $340 | $340 | | Waitakere | $298 | $290 | | Auckland | $325 | $320 | | Manukau | $300 | $300 | | Hamilton | $230 | $250 | | Tauranga | $240 | $260 |
The biggest drop in rents is in the 2 bedroom, Auckland inner city apartment market. Median rents two years ago were $420. The median is now $372.
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| Predications on the number of required Investment Property’s. |
| | Research released by DTZ NZ indicates that the supply of rental properties will need to grow by over 200,000 in the next 10 years. Of this approximately 92,000 will be required in Auckland. The housing could cost up to $50 billion to provide. DTZ believe that most of the demand will be for medium density housing and that a more professional management of private rental accommodation is required (via a "corporate, trust and other institutional investment strategies"). These numbers are in addition to the 100,000 properties added to the rental market between 1991 and 2001.
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| Homeownership rate. |
| | The report from DTZ (see above) also noted that homeownership rate in 2001 was 68%. They predict by 2016 this will be 61.8%. Primarily as peoples incomes do not keep up with increasing house prices and the ability of these people to save a deposit. Currently in Australia about 40% of all households rent.
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| Treaty of Waitangi Claims - Wellington. |
| | 353 sites in Wellington and the Hutt Valley have been listed as possible sites for Treaty Settlements. This includes commercial property, sections and residential dwellings. All the properties are subject to the State Owned Enterprises Act 1986 - known as Section 27 memorial Negotiations on the Port Nicholson Block by claimants began in 2004 and until recently were stalled. Compulsory purchase of property by the Office of Treaty Settlement would be a last resort. To date there has only been one Section 27 order in 1998 of Turangi township. Although the risk of compulsory acquisition by the crown was minimal, property owners should be aware of the Section 27 memorial on their Titles.
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| Commercial Property. |
| | The commercial property survey of the Property Council of New Zealand has hit a record. For the year ended June 2005 commercial property investors have had the highest returns of the index’s history 18.13% (June 2004 14.62%). The main influence has been the strong increase in capital gains, with the income returns remaining constant at 9.49%. Non residential construction also hit a record 12 year record for the June quarter. This is for the seasonally adjusted value. The June quarters figure was up 19% over the March figure.
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| Auckland. |
| | Areas classified as "working class" have had the biggest increase in property values when this years house sale prices are compared against the 2002 rating (Government) valuations according to a survey undertaken by the Weekend Herald newspaper. Areas that have had the biggest percentage increase in prices are:
| Manukau | Manurewa East, Otara | | Auckland | Glen Innes, Mt Wellington | | North Shore | Birkdale, Beach Haven |
According to the Real Estate Institute of New Zealand the median house sale price in August for Auckland was $375,000 ($264,000, August 2004).
| Manukau | $349,500 | | Auckland | $410,000 | | North Shore | $438,000 |
Apartments. Currently there are approximately 10,800 apartments in the Auckland CBD vicinity. There are approximately another 6,000 either being developed, or planned for by the end of 2007. There are another 4,000 odd proposed. Commercial Land. Research shows that there is only 2000 hectares of available land zoned for commercial purposes available in the region. Estimates are that it will all be used by between 2016 to 2021. The Regional Council is looking to address the most useful way of using the land with the respective city council’s.
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| Taranaki. |
| | Startford District Council is entering the residential development business as the population continues to boom. The council is developing a 40 lot sub-division.
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| Wairarapa. |
| | A new town in being proposed under a bold new plan to grow the regions economic viability, by the regions development agency. The goal will be to grow the regions population by 10,000 over 20 years.
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| Dunedin. |
| | Median rents for the quarter ended September dropped by $8 (Massey University real estate analysis unit survey). The median rent is now $212/ week.
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We have tried to include a variety of articles and viewpoints on property recently contained in the media. Please note that the articles are a summary of the main points and we endeavour to reflect these as accurately as possible. The contents do not constitute professional advice and should not be relied upon as such. We strongly recommend that you seek professional advice at all times. The information is in no way a reflection of views held by Valuit Asset Appraisals Ltd or its staff.
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