It has been a very quiet month this month in terms of articles relating to property investment. Two surveys have been released showing that it is becoming less affordable for first time homebuyers to purchase. With the increase in fixed term mortgage rates towards the end of March it looks likely this trend may continue. The Reserve Bank's review of the Official Cash rate at the end of April is likely to have a bearing on this. We hope you have an enjoyable Easter. In the meantime Read, learn, enjoy ....

.... and happy investing!
 

Building Consent figures for February show that there has been an increase in the number of residential dwellings planned with an increase of 5.8% over January. Prior to this January had a 3.7% increase but the last three months of 2006 saw a decrease in numbers for each individual month. The overall trend for building consents, and subsequent building activity, is downwards. The figures for February have economists split as to whether the market will continue to fall or is starting to swing upwards.

The second half of March saw fixed-term mortgage rates increase substantially. The primary reason for this is the wholesale money markets and their expectation that the Official Cash Rate will again increase at its next review - 26 April. Although there has been some speculation that Dr Bollard's round of visits to the lending banks may have some impact on this. The increase in rates will increase the margins, or profit, that the banks are able to make on mortgage lending.

For the quarter ended 31 December 2006 the New Zealand economy grew 0.8%. This was the largest increase in 18 months. The annual growth rate is 1.5%. This was within the expectations of economists.
 

A survey conducted by Research New Zealand found that :
- 82% of people were against the tax on the sale of property
- If the tax applied to investment property 41% of people agreed with it.
 

The results of two studies have been recently released.

In the first study, by interest.co.nz, they looked at the period from 2003 to now - which was basically the start of the current boom. The study looked at house prices, with mortgage repayments and the average after tax income.

The study found that, to buy the NZ average home, the mortgage repayments take 73% of the average take home pay (up from 43% in 2003).

The least affordable area was Central Otago at 105%. Other figures were;

Northland	78%
Auckland	93%
Hawkes Bay	65%
Manawatu/ Wanganui	52%
Wellington	75%
Canterbury	62%
Central Otago	105%
Otago	55%
Southland	38%

The second study, Massey University's quarterly home affordability index, began in 1989. It weighs house prices and mortgage interest rates against the national average wage. The current quarterly result shows it is the most difficult time to buy a house since the index began.

Commentators on the market have provided a number of ideas to alleviate the lack of affordability. These include:

- a State House building program similar to that in the 1950's to significantly increase supply.
- Relaxing requirements under the Resource Management constraints - allowing more urban sprawl.
- Change density rules and allow three houses on a site where Housing New Zealand has one and allow more medium density in other areas.
- Developers being forced to include a percentage of cheap housing in new developments

It appears that many of the 1 million baby boomers (people aged 40 - 60) are making it increasing difficult for younger first time homebuyers.

The baby boomers are often asset rich, mortgage free on their family home, and able to out bid the first time homebuyer.

More than 1/3 of new mortgages are to borrowers who already have one dwelling. Other factors making it harder for the first time buy include:
- investors from other markets such as Britain, Australia, and the United States investing in New Zealand
- increase in migration to New Zealand.
 

The Associate Minister of Justice, Clayton Cosgrove, is to seek public input in May for legislation he hopes to introduce to the House by the end of this year. In his comments he was very negatively critical of the way the industry body, the Real Estate Institute of New Zealand, has been operating.

The Institute and many of its members believe the overhaul of the Act is warranted and over due.