to Valu in Review for February 2006. This is a summary of news articles in the press over the last month or so.

After a comprehensive newsletter last month this months edition is a bit lighter as the volume of articles on the property sector has been quite quiet. You may find it interesting to read the full research report mentioned in the article about House Price Research. In the meantime..

Read, learn, enjoy, ...

... and most importantly - happy investing!

 

There are more and more signs that the economy is slowing down as predicted it would.

These include the number of consents for new residential dwellings which have dropped since the high levels in 2003/ 2004, to around 2,000 per month. In January 2005 the value of consents was $538m (1,898 consents). The figure for January 2006 was $502m (down 6.7%) on 1,900 consents. Average value of the dwellings was $217,805 (down 8.3%) but the average size was up to 193.7m2 (up 1.3%). These figures have been described by Statistics New Zealand as "slowing growth" for the residential sector.

The high value of the NZ dollar against other currencies is affecting New Zealand exporters.

Businesses are facing increasing financial pressure from factors such as the high currency, increased costs (for example fuel and wages). In addition they are reducing their spending on capital items and holding off hiring staff. In some sectors there is limited resources (for example skilled staff) so the businesses cannot get the growth that they would like. This is leading to reduced expectations of business growth.

Confidence surveys are generally showing that the respondents are expecting a slowing in the economy.

Retail sales for the December quarter and December itself were lower than expected. Car sales make up a substantial portion of sales. When these were excluded the numbers were in line with what forecasters had been expecting (small increases). The overall feel from Statistics New Zealand and economists commenting on the figures is that the numbers are an indication that the economy is slowing.

Trade figures for January indicate a deficit of $7.1b. This is the largest deficit to exports ratio for 30 years.
 

The monthly sales volume for a January were the lowest for 5 years according to the REINZ.

The number of days to sell increased from 27 in December to 38 in January but this reflects the Christmas period. The days to sell in January 2005 were 39.

Sales Volume	Jan. 2005	Dec. 2005	Jan. 2006	Annual change
National	7,071	6,906	6,360	-10%

Median Sale Prices	Jan. 2005	Dec. 2005	Jan. 2006	Annual Change
National	$265,000	$295,000	$300,000	+ 13.2%
Northland	$209,000	$290,000	$275,000	+ 31.6%
Auckland	$340,250	$395,000	$370,000	+ 8.7%
Waikato/ Bay of Plenty/ Gisborne	$244,000	$269,000	$272,000	+ 11.5%
Hawkes Bay	$245,000	$251,000	$255,000	+ 4.1%
Manawatu/ Wanganui	$140,000	$184,500	$180,000	+ 28.6%
Wellington	$275,000	$316,000	$313,000	+ 13.8%
Nelson/ Marlborough	$270,000	$281,000	$280,000	+ 3.7%
Canterbury/ Westland	$235,000	$263,000	$267,000	+ 13.6%
Central Otago Lakes	$345,000	$490,000	$495,000	+ 44.8%
Otago	$190,000	$205,000	$206,000	+ 8.4%
Southland	$117,000	$140,000	$124,250	+ 6.2%

The national figures are supported by QV which shows the residential property prices rose 16.8% for the 12 months ended January (QV use a different methodology to REINZ).
 

A research report has been released by Motu Economic and Public Policy Research (commissioned by the Centre for Housing Research, Department of Building and Housing, and Housing New Zealand Corporation).

The report looked at inflation adjusted house prices over the last 23 years (broken into 4 monthly periods). The country was divided into 73 regions (regional councils and territorial local councils). According to the study "10 territorial local councils had real house price falls between 1981 and 2004; four experienced real land price falls. Areas with negative or low real price rises were predominantly rural North Island or southern South Island" (page iii).

On a national basis the median in 1981, adjusted to today's value, was $112,000. It increased over 23 years by 105% to 230,000 in 2004. There was a big leap in house values in the 12 year period from 1992 to 2004.

The research also looked at patterns in housing supply. Long run developments in housing supply and the responsiveness of house supply are effected by factors such as economic and demographic variables (Demand factors).

The full report can be found at www.hnzc.co.nz/chr/index.html and is entitled Regional Housing Markets in New Zealand House Prices, Sales and Supply Responses. The authors of the report are Arthur Grimes and Andrew Aitken.
 

The Commerce Commission is warning real estate agents to stop advertising false low prices to attract buyers.

In particular the commission is concerned about the practice of "buyer inquiry" where the vendor has no expectation at selling at that level. This attracts prospective purchasers to the house with the false expectation they will be able to afford it.

The Commerce Commission is taking one agent to court in March over allegedly making misleading suggestions about a price a house would sell for.
 

The Auckland Regional Council has proposed a 4.9% increase in the residential regional rates - the maximum it believes the public will accept.