to the Valu in Review for November 2007. Some interesting articles this month. One about changes to the bankruptcy laws has the possibility to effect landlords that have rent in arrears. There seems to be growing signs that the property market is slowing down with most commentators saying the market is slowing in a gentle fashion opposed to the plummet many expected. In contradiction to this is one piece of research released at the end of the month saying that, Auckland in particular, faces a gloomy time in the next couple of years with a prediction that the market will plummet! The next review of the Official Cash Rate is on 6 December. As always please read, learn, enjoy ...

... and happy investing!
 

Migration has slowed significantly since a few years ago with the population expected to grow by just 5,000 this year (meaning less migrants looking for housing and fuelling consumer spending).

Dr Cullen, in a recent speech, confirmed his support for the Reserves Bank ("RB") approach to keeping inflation under control. The RB has a limited number of tools to manipulate the monetary policy to keep inflation between the desired target of 0% to 3% in the medium term. Recently inflation has been persistently at the top of this band. The result of the current policy and tools is high interest rates within New Zealand and the strong value of the NZ dollar internationally.

The next review of the Official Cash Rate is 6 December.
 

At the start of the month a significant number of lenders increased their rates - despite there being no review of the Official Cash Rate ("OCR") in November. Why? Because the cost of borrowing money outside of New Zealand to lend as mortgages in New Zealand has increased substantially. The cost in borrowing money in the international money markets has increased to the most expensive in the last 10 years. This is due to the credit crisis in the USA and defaults on "sub-prime" lending and the knock on effect to banks in the USA with rumours that many banks are suffering multi-billion losses. Also indications are that the New Zealand economy is remaining strong with the possibility of an increase in the OCR.
 

Figures from Both Quotable Value and the Real Estate Institute of New Zealand for the month of October indicate a slowing in the property market (low sales volumes, lower house prices than previous and properties taking longer to sell). Most bank economists are now predicating a soft landing on house prices (as opposed to the plummeting house prices many expected). These "softening" market comments are also reflected by a number of other property market commentators.

Many real estate agents are also reporting fewer visitors to open homes, fewer listings and lower inquiries from buyers on the listings that they do have.
 

As mentioned in previous editions the government has been placing pressure on the real estate industry to "clean up" otherwise it would legislate. At the start of the month the government announced the changes that will be enforced via new legislation to be introduced in 2008. The proposed changes include:
- removal of the regulatory function from the Real Estate Institute of New Zealand ("REINZ").
- Establishment of a new independent body (Real Estate Agents Authority). The main functions of the body will be licensing, complaints, disciplinary and enforcement procedures and provision of consumer information. This body will have wide investigative powers and have the ability to cancel licences and award compensation.
- Agents no longer required to be members of REINZ
- A new public register of real estate agents/ sales people which will record any breaches of industry standards
- A requirement that information is to be handed to consumers about the new authority, consumer rights, and a written statement if there is any potential conflicts of interest
- Licensees to have continual professional development/ education.
 

Research undertaken by DTZ forecasts that the decline in home affordability will continue. There will also be declining home ownership rates, good ongoing demand for housing, a drop in interest rates (sometime in 2008), and there will be continued low unemployment. There will also be a small increase in the population and in household incomes.

Towards the end of the month research conducted on behalf of PMI Mortgage Insurance by Infometrics on the Auckland housing market, and where it is likely to go, indicates a big downturn in the housing market that will take at least two years to recover. Factors leading to the down turn include an oversupply of apartments and uncertain housing demand (caused by weaker net migration into NZ and the strength of the dairy industry will lead to more people leaving Auckland).
 

The latest figures on home affordability indicates houses are continuing to become "less affordable". The figures are from Massey University's property group Home Affordability Report. The report compares household incomes (which according to Statistics New Zealand households are experiencing an increase in income), house prices (figures from REINZ indicate house prices are levelling off) and interest rates.

The Regions from least affordable are - (with affordability as a % of the national average):

Central Otago Lakes	149.4%
Auckland	121.7%
Nelson/ Marlborough	104.9%
Waikato/ Bay of Plenty	100.5%
Northland	99.8%
Wellington	97.8%
Canterbury	93.4%
Hawkes Bay	83.9%
Otago	72.7%
Taranaki	72.2%
Manawatu/ Wanganui	67.8%
Southland	54.6%

The report is based on numbers for August 2007. Houses are now 70% less affordable than they were 5 years ago.

Another report (Fairfax Median Home Affordability Report) reports that it now takes the average person in New Zealand 80% of their income to pay a mortgage. It was 43.2% 5 years ago and 67.9% 1 year ago.

5 years ago the average mortgage took 36.9% of the median take home pay. This is now 75.3%. A rate of over 40% is generally considered unaffordable.
 

A new procedure concerning bankruptcy comes into force on 3 December 2007. The No Asset Procedure ("NAP") change to bankruptcy law is aimed at individuals who owe less than $40,000, who have no assets, have no way of paying off their debt and who have unsecured bank loans, credit card/ store card debt, and other unsecured loans to garages, relatives and friends. (editor note: the article does not stipulate if this includes unpaid rent or not).

Under NAP insolvency is recorded for only 1 year (normally 3 years).

NAP does not apply to student loans, fines, secured debt (which must be repaid otherwise the assets will be repossessed), or anyone with a history of bankruptcy.
 

Figures released by Statistics New Zealand show that 238,299 people are employed in the property and business services industry. This makes it the biggest employer. Previously the largest industry had been manufacturing (237,000).
 

Wellington undertakes annual reviews of their council ratings (most councils are every three years). These are currently being sent out to home owners. The average house price has increased by 12.9% to $554,000. There are 71,854 properties in Wellington with a value of $48.99 billion. This includes all property types.
 

Ngai Tahu and Lincoln University have entered into agreement to plan and build a new township on land that is surplus (and adjacent) to the University. Work is expected to start very soon.