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

There has been no one piece of news dominating the property industry this month. Instead it has been a number of smaller articles of varied interest. The Official Cash Rate remains unchanged at 7.25% and there have been a number of press releases about changes to the Residential Tenancies Act that is currently under review. Please

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Building Statistics released for the quarter ended June 2006 by Statistics New Zealand, on a seasonally adjusted basis, shows that building work has fallen by 9.1% since the previous quarter. The residential housing sector was down by 10.3% on the previous quarter. This data is a good indicator as it relates directly to actual work underway in NZ.

At the review of the Official Cash Rate on 14 September the Reserve Bank kept the rate at 7.25% as expected by the market. What did surprise the economists was how strong the comments were from the Bank about the possibility of further interest rate increases in this cycle. Economists suspect that this may be a ploy by the Bank to keep the interest rates high in the short term. There is a massive number of mortgages coming off 2 year fixed rates and it is in the interests of the Reserve Bank that these renew at a higher rate to take some momentum out of the residential housing market. While the lending banks have said earlier in the month that they will be looking to focus on marketing campaigns and service and not price (lowest interest rate) - there are indications of some banks reducing their rates in the last week. The Reserve Bank expects
- inflation to stay above 3% until late next year - currently at 4% (which is okay as they have to keep under 3% in the medium term)
- consumer spending to reduce and flatten out through 2007 and 2008
- Unemployment to increase from its current low levels to about 5% by 2009
- Oil prices to reduce slowly back to about US$50 per barrel
- Overall a "soft" landing is expected.

At the end of the month Dr Cullen has expressed his view that the Reserve Bank is unlikely to raise interest rates this year and in all likelihood he cannot see the rate being reduced until 2008.

Data released by Statistics New Zealand indicates that NZ's growth rate is the slowest it has been in the last 5 years. The Gross Domestic Product rose 1.9% for the quarter ended 30 June.
 

There have been some suggestions that senior Reserve Bank officials are still looking at the possibility of a levy on every mortgage that is taken out by borrowers as a means of slowing down the residential property market. The idea was first raised in February of this year when the Reserve Bank was looking at mechanisms for controlling the housing market. The levy was effectively another "tool" to help control inflation - other than the primary means of the Official Cash Rate.
 

Changes to the Residential Tenancies Act will see tenants be responsible for water tax invoices where there is a separate water meter.
 

The national median price was down from July's figure of $313,000 to $310,000 (August 2004 = $249,000, August 2005 = $290,000). This was based on 8,562 sales (7,771 in July). August 2004 there were 8,143 sales and 8,537 sales in August 2005.
 

The bill for landlords to buy insurance to protect tenants for liability to damage to the landlord's property by other tenants has been dropped by Parliament. Although it will not proceed in its current form the Department of Building and Housing is looking to include the idea in its review of the Residential Tenancies Act.
 

A new plan being floated by Building Issues Minister, Clayton Cosgrove could see tenants fined for exemplary damages. There are three "acts" where tenants could be held liable. These are:
- over populating a premise (maximum fine $1,000);
- subletting or assigning a tenancy without consent (maximum fine $1,000); and
- harassing neighbours (maximum fine of $2,000).

Landlords had been seeking wider changes to address additional issues constantly faced by them such as rent arrears, wilful damage, and false information to obtain a tenancy. These have not been addressed although Cosgrove advised that an Officials Committee would be investigating the possibility of welfare benefits being paid directly to landlords.
 

Some apartment owners are encroaching on what has traditionally been the domain of hotels. Apartment owners are offering to rent their apartments on a night by night basis, or as a short term stay, and earn significant amounts of dollars that would normally be spent at hotels. As the apartments are classified as residential rentals the owners are not faced with the additional costs that hoteliers face such as business rates, fire safety, and mobility access.
 

In parts of Eastern Auckland (Tamaki, Pt England and Glen Innes) State housing makes up a significant proportion of the houses. The Housing Minister, Chris Carter, has floated the idea of subdividing many of the sections that State Houses sit on. As many as 3,000 new houses could be developed to change the socio-economic mix of these suburbs. This would be achieved by making a small proportion of the new houses available for State tenants. The larger proportion of houses would be developed in conjunction with private developers with these houses being targeted at first time home buyers, charitable organisations, modest income families and the open market.

This mixed use development is being trialled by Housing New Zealand in the new 3,000 home development at Hobsonville. Other suburbs where this mixed housing development could be trialled in are Mangere and Otara.

Housing New Zealand has also recently bought land in Papakura from the Defence Force for a further 450 houses.

Currently there are 4 State Houses in Auckland worth more than $1.4m. The most expensive has a land value of $1.9m and the house itself $100,000.