To the Valu in Review for December. This month there are some positive reports with the Official Cash Rate reducing, house affordability is increasing and mortgage rates have continued to fall. With the way the global economy is and changes occurring on a daily basis, forecasting of the economy is very difficult and nobody really knows where it is heading. There have not been a lot of figures released since the last newsletter.

The team at Valuit wish you and your family a very Merry Christmas and a New Year full of successful property investing decisions. As always please read, learn, enjoy ....
.... and happy investing.
 

A survey of economists taken in mid December found that the majority of those surveyed expected New Zealand's gross domestic product to shrink by 0.2% for the year ended March 2009. Three months ago the same survey found an expected growth of 0.2%.

Both the Reserve Bank of New Zealand and Treasury believe New Zealand is coming out of the recession. However New Zealand will have low rates of growth over the next few years.

Treasury's prediction for the economy expects unemployment to grow and likely to peak in the middle of 2010. The actual number of unemployed has a big range depending on what happens, ranging from 162,000 to 181,000 in the next 15 months.

The next review of the Official Cash Rate is at the end of January 2009.
 

Some interesting figures were released for the month of November. The figures released by a nationwide valuation company indicate a drop in house values of 6.8% for November when compared to the same period last year. The same figure applied to the October figures. This is the first time since August 2007 that the annual change in the property values has not dropped further than the previous month. The average sale price for November, nationwide, was $375,408. The property market seems to have peaked late in 2007, stayed flat for 6 months and then prices have fallen over the winter months.

The figures from the Real Estate Institute of New Zealand are that the median house price in November was 4.1% lower than November last year (but slightly up on October). For November 2008 the median national house price was $337,500 ($352,000 in November 2007). There has been a dramatic fall in the volume of sales with 7,837 Sales in November 2007 and 4,279 in November this year (October 2008 = 4,469).
 

A survey undertaken by Mike Pero Mortgages on 550 property investors indicates that investors are being tempted back into the market - primarily due to cheap interest rates. Results of the survey included:
- Approximately 60% thought interest rates were making the purchasing of property attractive again
- 20% expected to buy property before March 2009.
- Almost 30% expected to buy a property by late 2009.
- 45% thought the National Government will encourage residential property investment.
 

Seasonally adjusted figures from Statistics New Zealand for new residential buildings are at the lowest level since 2002 with a fall of 7.9% in the quarter ended September. In the past year the volume of residential building work has fallen 22.1%.

The number of consents for new dwellings in October is the lowest level since January 1992. 20,089 consents were issued for the year ended October compared to 25,777 for the same period last year.
 

The Wizard Home Loans Affordability Report continues to show improvements in affordability as mortgage rates continue to drop. In November the report had its biggest monthly improvement in affordability. The index fall from 67.9% in October to 63.9% on November of the after tax median income needed to service the mortgage in a median priced home. This is down from 83.2% in November 2007 but is still some way off the most affordable level of 45% in 2002.
 

With the reduction in the OCR, housing loan approvals were up significantly. In the week ended 12 December there were 9,314 loan approvals. This is the highest weekly number since June 2007 and the value of the loans was the highest since December 2007. The spike may have been due to people holding off awaiting the release of the OCR - but it does indicate that there is activity in the property market.
 

The recent ASB Housing Confidence Survey has found that buyers are the most optimistic since 2003. They believe that they will be in a position to benefit from the falling house prices early next year. The survey found that a net 24% of the respondents thought now is a good time to buy, a net 44% expecting house prices to fall and a net 25% expecting interest rates to fall further.

45% of all respondents thought now was a good time to buy.