[Timbo]

House prices easing


ASB Bank Housing Confidence Survey shows net two percent of respondents expect house prices to fall



8 November 2004

More people expect house prices to fall than expecting them to rise according the the latest ASB Bank Housing Confidence Survey.

A net two percent of respondents expect house prices to fall.

In the last quarter, a net two percent expected them to continue rising.

ASB Chief Economist Anthony Byett believes the average house price may be beginning to slip, but that will provide an opening for first time home buyers in particular to enter the market.

However he says they would be wise to sit tight for a few months longer as the cycle has yet to reach its trough, which could come within the next nine to 12 months.

[Robert]

It would be wise to bear in mind that confidence varies a fair bit depending on location within NZ.

Although a number of friends seem to feel property prices in Ch Ch will level off, everyone says they have never fallen before and won't now.
Certainly at present it seems that housing is shifting very quickly and lots of people are on the move.

Personally I am torn between not wanting to pay more than I have to and not wanting to lose heavily if prices do fall...

[kiwi]

he doesnt really drive a bentley! but he has written a few books and I usually enjoy what olly has to say....so here is his nov 04 predictions..get a cuppa...a bit of a long read but interesting...

THE CALM BEFORE THE STORM
-------------------------
The Governor of the Reserve Bank once again raised interest rates
-- this time by 0.25% to 6.5% which brings mortgage rates back to where
they were three or four years ago.

I believe that this rise was unnecessary as there is ample evidence that
the property market is slowing dramatically and the basic laws of supply
and demand will even things out anyway. Mr Bollard obviously doesn't
believe in supply and demand but rather in the socialist principle that
the "State Knows Best".

The evidence that not everything in the garden is rosy is clear to see
by those not suffering from a denial complex.
For instance:

(1) Once again the Government is changing the rules for immigration. For
years the immigration policy has been an unmitigated disaster and it has
a direct and profound impact on the property market, as we all know.

A few years ago immigrants were flooding in by the planeload, mainly
from Asia. This flood pushed up property prices not to mention demand
for cheap apartments with a language school on each corner. In a panic,
the Government put on the brakes and immigration dropped dramatically.

As a side effect many language schools folded like deck chairs on the
Titanic leaving a bad taste in a lot of mouths. So once again the rules
were changed to encourage immigrants back but now it's too late. You can
only flip-flop so many times before the novelty wears off.

The strengthening NZ dollar has made immigration expensive and the boom
in China has attracted potential immigrants away. Many investors hoping
for a continuation of the property boom fuelled by Asian immigration had
better think again and start praying for a miracle.

(2) One of the most extraordinary statements the Reserve Bank has made
in the last few weeks was the warning to investors not to invest those
finance companies offering high interest rates where these companies
have a high exposure to the property development industry

Such a warning is unprecedented but did not receive the wide coverage it
deserved. It can only mean that the Reserve Bank knows better than any
of us that many financiers are - or will soon be - in trouble for
backing hopeless borrowers or anyone who can swing a hammer and hit a
nail two times out of five.

It is irritating to read how some of these finance companies attract
investors by not only offering rates that are excessive, indeed
reckless, but describing them as "First Ranking Secured Debenture Stock"
or similar which sounds good but means little or nothing in the event of
default. My advice for those who want higher returns is to stick spare
cash into government bonds, or term deposits in the main trading banks.
Failing that there are several finance companies with long and
impeccable histories which may offer better rates with proper security.

(3) Currently there are advertisements breathlessly claiming that you
"only need a $1,000 down to own an inner city apartment". What does that
tell you? (If you can't it figure out go stand in the corner until you
do.) The fun part comes when you try to read the very fine print - with
the aid of microscope. This tells you that you have to own a home first
to qualify for this "bargain". In other words, hock your home to the
eyeballs while digging a hole for yourself in the process. Not a very
good idea at all.

If these apartments were so good they should be flying out the door for
CASH and not require property spruiker-type advertising to get them to
sell. Hands up all those who still believe that in a hot market you need
only $1,000 to buy a piece of paradise?

(4) We now see an all-out shooting war between the banks to see who can
lower their home loan rates the most. With the cash rate at 6.5% and
banks offering depositors anywhere from 6.5 to 7% it makes one's head
spin trying to see the logic in banks offering two year fixed term
mortgages at 6.9%. With virtually no margin to play with, the banks are
in a very awkward bind. Higher deposit rates mean that more people will
leave money in the bank now that it pays, and with fewer homes being
sold the demand for mortgages has dropped -- not mention the extra cost.
So shed a tear at the thought. The poor banks are now prepared to lose
money to gain market share.

But a word of warning. These very low home loan rates are often 'a sprat
to catch a mackerel' ploy. The banks are angling (excuse the pun) to get
other business from you -- such a credit cards, insurance, share trading
etc. so as to continue to practice their extortionist ways. The final
sting will come after the fixed term has expired and the rate will go
back up to a profitable level.

The banks rely on people's inertia in staying put rather than face the
awkwardness of refinancing

My advice: Hang sentiment. If your bank, having grown fat for years by
sucking you dry, doesn't want to play ball, wave bye-bye. Switch to
another bank so as to keep enjoying the best rates possible.

(5) Another disturbing sign is the fact that the number of homes sold
over the last 12 months has dropped dramatically -- down by over a third
to an half in volume

It means four things:
(a) Demand has slackened
(b) Interest rate rises are biting
(c) Many real estate agents will soon be selling shoes for a living
(d) More and more over-committed developers and speculators will go
to the wall.

For us investors the future looks promising. Soon enough there will be
bargains aplenty. I can hardly wait. In the meantime, don't stop
looking. There are bargains out there if you try hard enough. As an
example, let me tell you about one of my recent profitable adventures:

THE ROOM THAT NEVER WAS
-----------------------
Recently in a moment of boredom one Saturday afternoon I decided to take
the Bentley for a drive through one of the more affluent suburbs of
Auckland just to bring myself up to speed with what was going on in the
better-class areas.

As I meandered my way around I noticed much building and development
under way. Rows of tradesmen's vans and utes lined the streets. Concrete
mixers were pouring, block layers were blocking, chippies were hammering
away. I must say it all looked very busy. Almost every street I drove
down seemed to have a development of one sort or another in progress and
to the casual observer it would've appeared that the boom was a strong
as ever, and that the market was still pumping at full speed. But there
were, as well, some strange signs I couldn't help but notice.

One was an obviously weather-beaten real estate agent's billboard,
covered in graffiti, in front of a huge newly-built mansion which was
patently empty and unsold. A quick call on the cellphone to the agent
revealed that the property had been on the market for almost a year with
no takers. Originally priced at $3.75 million, the agent admitted that
anything over $2 million would be looked at seriously.

As the Bentley slid silently up one street and down another, I came
across several more similar properties. One was a house on a full site,
badly done up, vacant, which still carried an auction date of November
2003. Another phone enquiry revealed this property was still for sale at
$4 million but 'all offers would be considered'.

Yet another was a pair of luxury apartments which looked more like
carelessly put together Lego block. I recalled that these had been for
sale six months earlier at $3.25 million each. They'd obviously not
found buyers.

Then there were a lot of 'For Rent' signs. This was something new. Such
signs have always been rare, if not non-existent, until just recently. I
counted over 20 of them in less than half an hour before I tired of the
exercise and retired to my favourite watering hole in Mission Bay to
consider what I had seen.

As usual the Maitre d' had my special coffee waiting for me while one of
his staff parked the car. I sipped my specially-reserved blend and
realised the obvious: there were bargains to be had and there was no
time to lose!

I challenged myself then and there, just for the hell of it, to find a
bargain and buy it before the day was out -- and it was already 3pm.

Calling for the car (now freshly-groomed and polished as befits my
status) I drove furiously up and down the streets of the eastern suburbs
determined to bag a bargain. Could I do it?

There! A flag was fluttering. An open home (near the water and the
beach) was open to view. I would buy this one, I was sure. What was I
looking at? It appeared to be a two-bedroom town house, empty, a little
unfinished, but with magnificent sea views and within a short stroll the
beach

The price was a mere $895,000 which on the face of it was 'toppy' but I
had a challenge to meet and meet it I would!

As I wandered around the property something didn't feel right. There was
a large lounge, a separate dining room an ultra-modern kitchen,
bathrooms to die for, but still it felt wrong. The reason was that the
two bedrooms were too small for the property -- but how could that be?
Developers can be strange creatures, I thought, but surely not that
strange.

I watched other people wander in and out. I watched the indifferent
agent staring vacantly out of the window. Apparently it had been for
sale for many long weeks with no luck.

Looking at the reflection of the property in the glass windows of the
property next door, I suddenly worked it out. I could see another set of
windows reflecting back -- that didn't make sense with the layout in
which I was standing...

There was another bedroom. A third bedroom. A room that never was. How
was this possible?

Very simple: The original developer had hung the front door on the wrong
side of the opening. When it opened, it fitted exactly over the door to
the third bedroom -- hiding it from view the moment the front door was
swung open.

Buyers would walk right past the third (and master) bedroom blissfully
unaware of what they had missed and no doubt feeling (as I had) that the
price was too high.

Smelling a bargain, I made an unconditional offer then and there of
$675,000 giving the vendors two hours to accept or reject the offer.
They accepted. (Piling on the pressure. That's one way to create
bargain.)

Within days I had the front door re-hung the correct way, then had the
property valued with the third bedroom now properly accessible. It
valued up at $850,000. Not bad for three hours work.

The lesson, dear reader, is simple:

Always look for the 'twist' or 'angle' when viewing a property whether
it is residential or commercial. That way you will come to little harm.

Olly Newland
November 2004

[veronica]

Just picked this up from the news.

House Prices Continue To Rise
19/11/2004 11:11 AM
NewstalkZB

Property prices are continuing to rise despite predictions the market value would ease back.

Real Estate Institute figures show the national median residential selling price reached a new record of $252,500 in October, up from the September record of $250,000. Median prices increased in eight of 11 regions.

Real Estate Institute president Howard Morley says for months people have been anticipating a slowdown, but it has not happened and prices are holding right across the board.

But he says that despite the healthy market, there is some confidence lacking because of negative predictions.

[Moorf]

ARRRRGGHHHHHH....

We're waiting until Feb/March next year until we start house hunting again... would like to see what happens in the interim.

[Robert]

Bear in mind that rising median prices can be caused by an absence of low end sales (which ultimately feed the market...) as well as by generally rising prices overall.

I agree in the large part with the spiel above as it does impart some essential truths and a lot of common sense. Housing values are all about confidence though - at one time Tokyo was valued at more than the entire western seaboard of the USA....

In the end I have bought a house, but only because my landlord wanted his back and the thought of an extra move was just too much. I bought in an expensive area hoping that the high confidence and type of purchaser will keep the price at least level (Hmm...) I am disappointed though to see realtors asking plainly ridiculous prices for property here however as it seems likely that unfulfilled expectations will eventually lead to a loss of local confidence...