to Valu in Review for January 2007. This is a summary of news articles in the press over the Christmas/ New Year period.

Articles on the property market have been fairly scarce. We have the usual market indicators of the property market (house prices, home affordability) The good news, for property investors, is that the national weekly average rent has increased – the first time in a long while, and that home affordability continues to decrease, as does home ownership rates. This is not good news if you are a tenant!

Dr Bollard is back from leave next week with the first review of the Official Cash Rate for 2007 due next week.

We are also looking for someone to join the Valuit team – a great opportunity. See the details to the right for more information.

We hope that you had a great break and are easing back into the swing of things. Until the next Valu in Review

Read, learn, enjoy ...

... and happy investing!
 

The first review for 2007 of the Official Cash Rate ("OCR") is due by the Reserve Bank on 25 January. In 2004 and 2005 the OCR was increased 9 times with no increases in 2006. The OCR is currently 7.25%.

The majority of the commentators believe that the housing market for 2007 looks positive with good gains expected in house prices.

The economists are picking a year with a growth rate about 0.5% per quarter (as per the last 2 years) for the economy as a whole. This is only half of the average rate over the past 10 years.

Indications of renewed strength in retail spending and the housing markets continued strength have increased the odds of an increase in the OCR in 2007. However the problem remains for the Reserve Bank that increasing the OCR has had more effect on the exchange rate than on the housing market which they are attempting to slow down. As a result, in many economists’ minds, the economy remains off balance with growth coming from the domestic market as opposed to the export market where they would like to see it.

Good migration, secure jobs with plentiful supply and a shortage of good candidates mean that people are feeling confident. The expectation is for the average house price not to fall but the increase in house prices (house price inflation) to reduce from a rate of 9.8% in October 2006 to below 5% by the end of 2007.

This will all add to the inflationary pressure that the Reserve Bank must keep a close eye on to remain within its target as set by the Government.
 

Figures released by QV for December 2006 showed an increase of 9.2% growth in national property values over the past year, slightly down from November (9.4%) and October (9.6%). The average sale price for NZ increased slightly to $348,886.

The national median house price for the month of November, according to the Real Estate Institute of New Zealand was $330,000 (Note: REINZ and QV are using different measures; average and median).

	Nov. 1997	Nov. 2005	Oct. 2006	Nov. 2006
Median Sale Price	$170,00	$300,000	$324,000	$330,000
Sales Volume	7,231	9,357	8,857	9,990
Median Days to Sell	34	27	29	29

 

The Government has announced a new website is to be established to make all rulings of the Tenancy Tribunal easily available. The site should be available from February or early March 2007 according to the Department of Building and Housing.

A feature of the site is you will be able to search by names of tenants and landlords.

One of the objectives of the site is to reduce the loss of millions of dollars from unpaid rent and deliberate vandalism by tenants.
 

A survey released by the Economist magazine shows NZ has the 12th fastest house price increase compared to the rest of the world. The survey looks at the house price increase in each country over the past 10 years.

In 2002 NZ topped the survey.

The survey has prompted some market commentators to say that they believe the suspected cooling in the housing market in NZ may have actually happened.
 

Figures released, based on the 2006 Census, shows the number of dwellings owned by their occupants has fallen by 13.5% in the past 10 years, from 860,760 to 743,952.

The number of households paying rent rose almost 34% in the same time, from 290,124 to 388,272.

In 2006 approximately 60% of dwellings were owner occupied. This compares to approximately 80% in 1996.

Note a direct comparison cannot be made as the Census questions have changed slightly between 1996 and 2006.

Since 1996 the actual number of dwellings has increased by 200,000.

Home ownership rates in other countries:

Ireland	77%
Britain	70%
United States	68.5%
Canada/ and NZ	60%
France	56%
Netherlands	55%
Denmark	53%
Sweden	46%

 

Statistics released by Massey University, show that the median national weekly rent has increased from $260 per week for the first time since 2004. In August the national median weekly rent was $265, and in October and November it was $270.

The strongest annual rent increases have been in the provincial towns particularly Gisborne (24.7%), Palmerston North (14.2%), Invercargill (13.3%) and New Plymouth (12.5%).

 

Houses are at their least affordable in 18 years. This is when the survey by Massey University, first began.

The survey looks at interest rates, national median house prices and average weekly wage. For the three months ended November 2006, affordability fall 5.1%. The latest fall was due to the increase in the national house price median being larger than the increase in the average weekly income.

The fall follows the trend of home affordability falling for the last 20 quarters (4.5 years).

On an annual basis home affordability has fallen 7.3% in the last year (to November 2006).