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

In summary for the month the IRD has been undertaking tax audits for the past 2 years in the South Island and they have released some details of the audits. The economy remains resilient with the expected down turn in the housing market remaining an expectation. Christchurch and Auckland City Councils have announced new initiatives for housing. Please ...

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... and happy investing!
 

Economic results released in November indicate that the economy is on the rebound.

For the year ended 30 September NZ's resident population grew by 1.1% or 43,500 people to 4.15m people.

For the quarter ended 30 September, employment was down 9,000 people (or 4.4%) and unemployment was slightly up by 4,000 people to 83,000. The overall rate of unemployment was 3.8%. Despite the increase in the unemployed rate - the number of people in employment remained very high with the second highest recorded rate for New Zealand.

Inflation dropped from 4% for the year ended 30 June to 3.5% for the quarter ended 30 September.

Both National and Labour are agreed that the current monetary policy was not as effective as it could be. With the residential mortgage market predominantly on fixed term mortgages any changes to the official cash rate take substantially longer to trickle into the economy. The increases in the Official Cash Rate were instead starting to affect the export sector with higher interest rates and the value of the New Zealand dollar. As to the fix - no one is sure what the best method is but it will not be an overnight fix.

The Official Cash Rate was left at the current rate of 7.25% when it was reviewed in November. The market was fairly well evenly divided as to whether they expected an increase in the rate or for it to remain steady.

Earlier in the month Dr Bollard of the Reserve Bank returned to a familiar theme warning that NZ's continued investment in residential housing would result in weak economic growth for the country and the risks associated with it. Dr Bollard was advocating shares as a mechanism to address his concerns.
 

An independent inquiry into how Councils set their rates is not likely to result in lower rates for property owners, but it may result in changes in the way the Councils raise money. The terms of reference for the $1.5m inquiry allow the inquiry to look at how rating systems could be enhanced and not what the councils can and cannot do. Written public submissions can be made at the start of 2007.
 

Auckland. A scheme between the Auckland City Council and a developer will see the council contribute $1m per year towards a scheme to help working householders into their own homes. As this is a pilot scheme there are a number of issues to be sorted out including potential sites, potential ownership and management models. The goal of the scheme is to "develop enduring, sustainable and affordable homes for ownership by working households".

Christchurch. Housing New Zealand and the Christchurch City Council are developing 20 units of what is described as social housing. It is the first time that these entities have undertaken such a project together. The Council is committed to at least maintaining the current level of social housing and is looking to grow the number of houses in certain areas. Currently the Council has 2,651 units and is NZ's second largest social housing provider after Housing NZ.
 

Research data shows that the number of brick clad houses has increased from 40% to 50% of all house cladding types in the last 6 years. Even though the number of new houses has dropped slightly recently the market still requires 70m bricks annually. It is believed that the reasons for this are a move to avoid "leaky home" issues and brick is one of the cheaper claddings available.
 

For the month ended October 2006 the median house price nationally is $324,000 (up from $296,000 in October 2005 and $313,000 in September 2006). This compares to $165,000 as the median in 1997. This is based on sales of 8,857 (October 2005 was 8,513, and 8,671 in September 2006). The median days to sell are 29 (October 2005 was 28 and September 2006 was 31). The value of all sales in the month was $3.382b.

Overall all 12 regions within the country were up over last year. However when you look deeper at the figures, down through the regional level to the suburb level, the returns are interesting. An example is the Auckland market where some suburbs have had dramatic increase or decreases in the last year in their median house price. Some suburbs have increased by 13% while others have decreased by the same amount. For Auckland the average median increase is the last year has been 3.8%.

Statistics New Zealand advised that, on a seasonally adjusted basis, new dwelling consents have fallen 1.9% in October. This was primarily as a result of a drop in apartment consents. Notwithstanding this the number of consents was still 18.6% higher than the same month last year.

The ASB Banks quarterly survey, for the period ended 30 September, found that confidence in the housing market had generally increased. The finding of the bank is that over the past 6 months the results have changed with the overall result being that respondents believe that house prices will increase, and that it is a good time to buy. The Bank believes people feel that it is a good time to buy as people have more time to select houses and that the increase in house prices is not as quick as in the recent past. The respondent's still expect interest rates to increase.