to Valu in Review for December 2006. This is a summary of news articles in the press over the last month. Being December this newsletter is short due to the short month.

There are three main articles. The first is the normal brief economic review, the main focus being that the Official Cash Rate did not change at the beginning of the month; secondly there has been a substantial award in the High Court against a real estate firm for not disclosing a situation of conflict. This award maybe challenged in a higher court due to the impact it may have against real estate agents; and finally there is a brief overview, of some of the changes in the Residential Tenancies Act for next year, particularly on the tenant's liability.

The team at Valuit wish you and your family a very Merry Christmas and a New Year full of successful property investing decisions. In the meantime please

Read, learn, enjoy ....

.... and happy investing!
 

The Official Cash Rate was left at 7.25% at its review by the Reserve Bank on 7 December. Once again the Review came with a strong statement aimed at the housing market. Any interest rate increases in the New Year will depend on what the housing market does over the next few months. However the Reserve Bank is stuck between a rock and a hard place. Any increase in interest rates will affect the value of the NZ dollar which, the Bank does not want to increase. Other factors of note were;
- Following on from recent drops in inflation, inflation is expected to drop to 2% by mid 2007 and then increase to about 2.7 by year end. However this prediction is based on higher interest rates than we currently have,
- Household spending continues to increase,
- The labour/ employment market remained strong with high levels of employment and low levels of unemployment,
- The housing market appears to have gathered momentum again after slowing in the first half of the year.
- Migration was higher than the Reserve Bank was expecting.
- Economic growth is expected to grow by 2.1% in 2007, 2.7% in 2008 and 2.5% in 2009.

The Reserve Bank is still forecasting house prices to decline in New Zealand but is expecting it later than earlier predictions and the adjustment downwards to be less.

The Reserve Bank is also concerned about the budget surplus the Government has and any plans for tax cuts or capital spending which could have an inflationary effect and force the Reserve Bank to increase the Official Cash Rate.
 

The figures released by the Real Estate Institute of New Zealand for November showed an increase in the national median sale price to $330,000, up from $324,000 in October (and $300,000 in November 2005).

The volume of sales was also up.
November 2005 - 9,357 sales.
October 2006 – 8,857 sales.
November 2006 – 9,990 sales.

The national median day to sell in November 2006 was 29, the same as October. This was 2 days more than November 2005 at 27.
 

A real estate agent and the agency she worked for have been found to be in breach of the fiduciary duty they owed to the owners of the house that they were selling. The High Court has found that, at the time of the sale of the property, the property was valued at $3.2 million but was sold by the agent for $2.5m. The agent breached her duty to the sellers by not disclosing what her relationship to the buyer was and the Court found that this had been misleading and deceptive. The property was sold 5 months later for $3.55m.

The High Court has awarded approximately $900,000 to the original sellers of the Auckland property. This is made up of compensation, damages, interest and return of the agent's commission.
 

The Minister for Building and Construction, Clayton Cosgrove, has outlined his most recent amendments to the changes in the Residential Tenancies Act. He plans to introduce the bill into the House about the middle of 2007 to amend the Act.

The current proposal would see tenants liability limited to a maximum amount equal to 4 weeks rent. This is subject to the tenant being able to prove that any damage to the property was:
- caused carelessly, AND
- that they did not act recklessly or intentionally
- OR that they did not personally cause the damage.

Both the Insurance Council of New Zealand and the Auckland Property Investors Association have spoken out against the latest proposal.

A private members bill earlier in the year had proposed similar ideas of limiting tenants' liability but that had been rejected by the Social Services Select Committee, so never made it into law.

Other issues being addressed in the proposed changes to the Residential Tenancies Act include:

- Allow landlords to claim reasonable debt collection costs in enforcing Tenancy Tribunal Orders

- Review the rules for ending fixed-term tenancies and renewing tenancies

- New rights of entry for real estate agents and building inspectors to conduct appraisals

- Landlords that leave NZ for more than 3 weeks must have a NZ based agent

- New sanctions for Tenants and Landlords that breach their obligations.