What Stops Houses being Cheaper

Why are prices strong? A number of reasons:
A population that is growing & moving.
Dwellings are having, on average less ocupants. Do you know the average in 1900 was about 7 people per dwelling? Average!
Growth in migration.

Build costs, all up, are phenominal! Consents, land, decorating, landscaping, funding. In Wellington the build cost, true, seldom is under $3000 a square metre by the time you walk in the front door! Without land!

Now, add to that the nanny state. I tell people you need rocks in your head or be very very good to make money in NZ developing land & building residential homes en mass. The intrusive & arbitrary power of the state is a real uncertainty to costs & completion dates....ie to if you will make or lose money. Its a lottery.

Here is very good comment from Tony Alexander, BNZ economist. I recomend his weekly newsletter. Subscribe here

http://www.bnz.co.nz/Business_Solutions/1,1184,2-22-842,00.html

I Quote:


While we do not expect the pace of growth in sales earlier this year to reappear in the near future prospects
remain good – as we have long indicated – for average house prices to keep rising for the next 1-2 years.
There is the lowest level of addition to the existing housing stock in four decades and an upturn in
construction while underway will be constrained by a shortage first of funding for developers and then late
next year by a new shortage of contractors.
You may have noticed during the week that one of the other forecasting groups has adopted quite bullish
commentary on the housing market. So this now is where things start to get quite interesting. Regular
readers will know that over 18 months ago we were warning that although house prices would fall they would
decline maybe “only” 10% - 15% because of supporting factors such as rapidly falling construction, an
under-supply of housing, and the eventual impacts on debt-loving Kiwis of falling interest rates and
improving net migration flows. We suggested that if people wanted to make a “canny” purchase in the
housing market they should do so before the middle of this year.
Prices on average have now risen 9% since January and as we pointed out here last week the price gains
are occurring in the three main urban centres and not the regions this cycle. That aside, one of the other
things we pointed out last year is that probably in the second half of this year the debate about affordable
housing would reignite. That has not happened in public forums yet as far as we can see, but it won’t be far
away now that there appears to be general awareness of the property shortage moving out of just a dearth
of listings into a physical shortage of properties.
One might recall how when we were writing positively about the housing market in Winter the doom-sayers
were forecasting prices would decline anew because Spring would bring a flood of listings. That has not
happened, but one suspects the improving house price sentiment/discussion will bring forward a few more
sellers looking to alter their long term property exposure to something better aligned with their underlying
cash flows and risk tolerance.
But back on affordable housing. This is an extremely important issue with regard to social inclusion and
cohesiveness. One of the things we generally appear to value as New Zealanders is the ability to own our
own home and not to live in the tiny accommodation so prevalent overseas. When house prices were
skyrocketing 2-3 years ago and worries about this threat to our culture were high the Commerce Select
Committee held an investigation into the home affordability issue and produced a set of relatively lacklustre
recommendations which as far as we can tell have had no impact."

Yes folks, unless something big changes, houses in the places there are jobs will continue to be in demand.

And unlike other form of investments...you can live in them too!

Tenders effectiveness noticed by Quotable Value

We always like it when others agree with us!
Quotable Value, in their monthly press release, have reiterated what I said recently in this blog. That is, tenders are changinging the face of the market, while stock is short.
Here I quote them:

“The continued shortage of properties is leading to a continued
imbalance in the market with more buyers than available properties.
As a result our Valuers are seeing many properties sell for well above
their expected values. These demand-based price increases are likely
to continue until the balance in the market changes. This will happen
either when more properties come onto the market, or when buyers
consider prices to be beyond their affordability and as a result consider
other parts of the market, or resolve to continue their current living
arrangements” said QV Valuation Manager Glenda Whitehead. “The
lack of strong spring activity could be due to several factors. Many
owners will have locked in to lower long term interest rates at the
beginning of the year and will be concerned about losing those rates if
they sell. Having made the decision some months ago to stay put, they
may now be extending or renovating and no longer be considering
selling” said Whitehead.


Tenders effective in current market

Pieter Geill of QV Valuations said: “The shortage of listings in Wellington
continues. The traditional spring resurgence which we would normally
see at this time of year is still holding off and is putting upward pressure
on prices. Good homes are attracting competition amongst buyers,
especially at tender which seems to be an effective sales method in this market"

NZ Real Estate...10 Year High

Predictions of up 10% in next 10 months..

Average price in Wellington $400 000....10% is $40k, 10 months, $4k a month, up $1000 a week.

What prat keeps saying property is not a gopod place to put money?

Thanks here to "Scoop"

Nov. 13 (BusinessWire) – New Zealand house prices hit a 10-year high for the month of October amid a decline in the volume of sales as fewer properties are put on the market.
The national median house price rose to $355,000 last month, from $350,000 in September, according to the Real Estate Institute, with the median value increasing in seven of the 12 districts surveyed. The volume of sales declined 5.8% to 6,091 from a month earlier as the shortage of properties continued to keep Spring listings low and helped bump up prices.
Related Stories on Scoop
Auckland houses prices reach 22-month high 04/11/2009
NZ home building permits climb for third month 30/10/2009
NZ house prices extend gains in September: REINZ 14/10/2009
NZ apartment permits fall, total consents climb 29/09/2009
NZ house prices edge higher in August: REINZ 14/09/2009
Results powered by search.scoop.co.nz More Related Stories >>>
“The rises aren’t, in most cases, dramatic, but slow and steady over the past few months as confidence returns to the market,” said president Peter McDonald, in a statement. “I believe the market will firm even further with the better economic news we’re hearing more and more frequently.”

Are you now safe?

Lets see if this will please the REAA!

The New Act : Real Estate Agents Authority

Yes folks...another bunch of people to look after you.

I am just checking that , as everything I do must comply with a few simple things ( to save you from me, I believe) that my blogs now carry a legal requirment. Lets see if I have added it correctly after my name. You are now warned!

Agents "Buying a Listing"

Really annoying to all except the company that bank the fee.
Now, every salesperson occasionally get over enthused. And they need to be optomistic. But sometimes its clear a high price...very improbable...is suggested ( always when several companies are involved!)
Highest gets it. ...The listing has been "bought!"
Dosnt sell at first, evidence of real value feedback is given.... (wheeling in the hearse is the term) Vendors expectation reduced & motivation is higher....sold for what the other companies said.
Just heard one yesterday..."winners" minimum $100 000 higher than others "market value"...be interesting, but dont think they will get it!

Residential Investment in Wellington

Ill do a more detailed blog on this subject soon.
For now...lots of investors appeared early in year but didnt buy. Now there is more competition.So they missed out ( See examples of good buys in my march Blogs, with photos.)

Real estate companies seldom leave "bargains" around like all the out of date investment books talk about. Not enough silly , distressed private sales to satisfy their demand. Everybody factors in adding bedrooms, putting on sleepouts, so few chances there. & several potential buyers for each etc. Ill talk about successful strategies for 2009 soon.
Meantime interesting Aussie web, found through twitter....http://positivegearingproperty.com/
Just dont expect this stuff to work on a well marketed property with a good real estate salesperson!

All may change with changes to LAQCs & deductions...we dont know yet.
Im also going to discuss "Buyers agents" ...in Wellington.

Wow Is for Worries! Real estate agents Act 2008

Wow!

How would you like to be working under a new Act of Parliament where part of the act says:

" A charge of misconduct or unsatisfactory conduct may be brought and dealt with despite the charge not being based on a breach of any specific rule"

Buyers, sellers, agents' competitors, and their own colleagues are not just encouraged to file a complaint, but LEGALLY OBLIGED to do so ...if they have "reasonable grounds" for believing unsatisfactory conduct has occurred. Life could be busy for the tribunal....hmmmm...... reasonable grounds....

I suspect Ill be saying more on this Act, which comes into effect in 2 weeks.

Lots of excitement and heartache to come from this ill thought piece of law.... you heard it first here!

Apartment, Or Mansion?Whats Your Fancy?

Viva la Difference!

If we all wanted the same property...well, It would be crowded.

When looking through a 260m2 penthouse recently (lovely, 3 carparks, big harbour views, $3 million) I commented that $3 mill would buy the best house in Mount Victoria!

And here it is! 25 Brougham st. About 440 restored glorious square metres, FOUR car parks. No harbour view, but no body corporate meetings with the other 91 owners in the apartment building either.

Price? be quick...low to mid $2 millions. Be quick! To me...that is a bargain .I want it.

Leasehold Apartment Land Comes To Wellington.

Well it has been here a while.
"Piermont" was the first "modern" developer lease to go through that I know of.
"The Wellingtonian" tried, but it faltered & freehold was offered as an option.
The idea is the apartments are "cheaper" because you don't own a share in the land underneath. But you pay a lease, in modern cases here & Auckland (where all clever ideas come from) to a company set up by the developer.
The reduction in purchase price seems small or non existent, compared to those sold with freehold. This suggests purchasers either don't value, or know the value of the lands freehold.
In the cost of Piermont I understand the first several years lease were pre paid. There is interest in what the first review will bring.
The cost of the leases is related to the value of the land. Since building values tend to go down in real terms ( it is a depreciating asset) and land values go up, this takes away a capital gain advantage from the purchaser.
But a much worse feature is that in boom times, when everyone else is benefiting from rising values, what is happening to these unfortunate leasehold apartment owners?....The value of the land goes up, increasing the cost of their lease. DECREASING the value of their apartment.
There were cases in Auckland I believe where apartments costing $600 000 soon had leases of over $100 000.
There are grumbles already from owners, and murmurings from valuers about the the Piermont lease. I have however never seen one, & would be interested to hear any comments on it.
Another leasehold development is being sold I have been told, as we speak. I will find out if this is the case.