to Valu in Review for October 2005. This is a summary of news articles in the press over the last month.

Read, learn, enjoy ..

.. and happy investing!

 

The quarterly ASB Bank Confidence Survey has found that a growing number of people expect residential property to give the best returns in the third quarter of this year.

For the first time since the June quarter of 2001 the inflation rate breached the Reserve Bank’s target range of 1% - 3% but not in terms of the “on average over the median term”. The inflation rate was 3.4% -an increase of 1.1% from the June 2005 quarter.

Average incomes have increased 6% in the last year to $586 per week.

The Official Cash Rate has been at 6.75% since March 2005. This has been increased this week to 7% by the Reserve Bank. Things that have effected the decision to increase the OCR are:-
- Continual increase in house prices
- Consumer spending, especially on imported items
- The spending being funded by debt
- Planned Government spending as a result of election promises and coalition negotiations
- The NZ dollar being valued so highly against other currencies.
- Current account deficit.
 

The answer depends on who you listen to. Real Estate Agents and their professional body are continuing to talk up the market, quoting shortened median days to sell (national median is 27 days – as at the end of August 2005) and higher median sale prices (National is $290,000 - August 2005). Some economists are quoting raising interest rates, decreased migration, more new housing stock being completed, low rental yields, fewer foreign students, high exchange rate and rising inflation as factors that should cool the market from the recent boom period. Most economists do not see a crash in the market but a slowing down, with one predicting house prices reducing during the middle of 2006 and 2007. Thereafter a period of relatively stagnant growth in house prices. The Reserve Bank is also predicting a cooling in the housing market with a decrease in house prices likely.
 

A survey has been undertaken by the Building Research Association of New Zealand on a sample of homes in Auckland, Wellington and Christchurch. The survey found that 80% of home owners thought their homes were in good or excellent condition. The building inspectors that undertook the survey believed 50% of the surveyed homes meet the condition of good or excellent.

The main issues identified were inadequate ceiling insulation, inadequate under floor ventilation, foundations in poor or serious condition, and a lack of hot water cylinder constraints in case of an earthquake.
 

The 85 unit Greenwich Park development in Auckland received a settlement of more than $1.3m in compensation for their claim over a year ago. The money has not been distributed by the Body Corporate as it decides what to do with the settlement. There are effectively 2 groups of owners. Those that want the money for their own individual portions to do what they want with the money and those that want the money used to employ contractors to fix the entire complex.
 

This was the amount of damage caused by tenants to property last year. A new record. This included $100,000 for clean up costs of 6 P labs in the past 2 years.

Of this bill Housing New Zealand received back from tenants approximately 50%. This amount is what it considered to be “reasonably assumed to be the tenant’s fault”. This is damage that was intentional or caused by negligence. In one case a tenant in South Auckland faces a bill of $9125.
 

QV continues to roll out rating valuations across the country with Queenstown Lakes, Papakura, and Ruapehu district amongst the most recent with significant increases

A number of commentators on the property market have been stressing that the QV values were for rating purposes of the relevant council. The QV rating valuation does not have any real relevance to the actual market value of the property due to the appraisal methods used. If people wanted an opinion of what the property is worth they should get an independent opinion from a registered valuer for a market valuation.
 

There are 119 houses backing onto Cornwall Park that are on land owned by The Cornwall Park Trust Board. For 27 of the houses, after 21 years of fixed rent, the ground lease is due for renewal.

The rental payments are based on 5% of the total property value. Given the substantial increases in property in the last 21 years the building owners are facing substantial increases in ground rent. The properties are valued in the $800,000 range. As an indication one property’s increase has been quoted increasing from $4,000 pa to $34,000 pa.

Some residents are trying to sell their dwellings but once prospective buyers become aware of the issue they are not pursuing the sale.
 

North Shore residents have been warned that they face an increased in rates of 6%-7% each year for the next 8 years, making the average rates demand $2,500. This is to fund urgent infrastructure work.

This is being seen as a catalyst to fuel debate over whether Auckland has too many councils and if savings could be made by having a more efficient administration system and eliminating duplication of services for the region.
 

A report commissioned on the stormwater system in Tauranga estimates that $70m is needed to be spent from now until approximately 2014. This is to enable the stormwater system to handle the volumes as experienced in May this year. The amount of rainfall experienced in May is expected to occur more regularly in the future as the climate changes. Temperatures in the BOP are expected to be 3.8C higher in 2080 than in 1990. Recommendations in the report included:
-Eliminating soakholes from approximately 4000 homes,
- Part of Otumoetai Golf Club becoming a stormwater catchment area in times of heavy rain to protect nearby residential development,
- Reviewing the flow pattern of stormwater over land and altering the path of excessive flows.
 

Hastings District Council has been consulting the community over a 540 section, 9 km long proposed development at Ocean Beach.

Only 10% of the total area is proposed to be housing in the form of 2 villages and a hamlet. One of the villages would be on leasehold land. The rest of the land would be used for environmental and agricultural purposes as well as parks, “squares” and “greens”.