Autumn 2010 Market Update
Wheter you are a rental investor, a family seeking a bigger or newer home, downsizing, or retiring to a complex, or a first home buyer, it's important you are informed of local market conditions from people at the coalface. Real Estate analysts and media commentators rely upon sales information that Real Estate Companies supply, however by the time it reaches these people it is historical and does not always reflect the trends we are seeing. Many property sales are subject to another house selling, financial conditions being satisfied as well as Legal requierments such as LIM reports etc. It is not unusual for this sale process to stretch out over several months and during this time analysts and media are not aware of what is actually happening in the Real Estate market that will impact in the medium term.
Relying on media commentary as to when to purchase a property is not in my opinion the best means of determining what is best for you and your family, particularly when it comes to decisions that will impact upon your investments, family enjoyment and security over the coming years. The average home owner buys and sells every seven years, so it is a decision that should be based upon current facts together with independent advice.
Blenheim Real Estate market conditions differ to bigger cities such as Auckland, Wellington and Christchurch so a decision to buy property in Marlborough should be weighed up on availability of local properties that fit your family needs and finances.
Family Homes Buyers
I believe that provided you are moving up the rung in dollar terms there are plenty of positive reasons for you to make a decision to buy now. Interest rates are still at historical low levels but the Reserve Bank has said they will rise later this year. At present Banks do have money tolend that will not be as plentiful later this year and next year when the new Reserve Bank policy restricts how much NZ Banks can borrow offshore for mortgage lending. We have a great range of properties for sale at realistic prices, however this will change as the Recession concludes and more buyers enter the market chasing the same or a lesser number of properties for sale. The past eighteen months has seen the volumes of new homes being built in Marlborough decline markedly, however the population has increased and is forcast to continue to increase so supply and demand factors will also impact over the next few years.
Rental Investors
Much of the above also relates to Rental investors but additionally we are now hearing that rents across most of NZ are increasing as demand exceeds supply. Some first home buyers are not confident to purchase or simply do not have the required equity to enable them to buy but these same people will have to live somewhere and their expectations of what they will rent is increasing along with what they will pay in rent. While the Government has signalled depreciation will no longer be able to be capitalised into rental income they have also ruled out a capital gains tax. It is hard to imagine any NZ Government building a stock of houses for people to rent as they did many years ago so market forces will come into play as stock levels of rental properties decline.
Investors also face a real problem when searching for alternatives to the housing market especially when historically strong companies such as South Canterbury Finance run into turbulent waters and the Governments own fund Kiwi Saver has providers such as Huljich manipulate returns to investors to keep things looking rosy.. I have lost track of the number of Finance companies that have simply disappeared taking hundreds of millions of dollars away from peoples savings and retirement funds so is it any wonder people want to invest in property and be able to drive past their bricks and mortar investments?
First Home Buyers
Getting the first step on the property ladder has always been the biggest hurdle historically and nothing has changed. Currently we have a great supply of properties for first home buyers and of course interest rates are still low however as outlined above this will change. Waiting until the economy recovers or until you have a larger deposit is in my view a mistake. I would urge first home buyers to look at the Government scheme that is available, talk to a Bank you have a history with and finally seek support from your family to get you underway with a deposit. First home buyers should always consult a Lawyer before committing to any property or financial arrangement. Family are always great for advice, however buying a home is a huge step and a Lawyer will always have a better overview when it comes to leagal matters.
Residential Property Investor
Provided the property investor is taking a long term view when buying on todays market there are benefits as outlined above such as a great range of properties to choose from, sellers who are realistic in expectations however the chances of buying a Residential property in this market and then on selling it in a short time frame for a large financial gain is poor at best. There has always been a capital gains tax for people who buy and sell property purely for profit as it is a taxable activity what has changed is that the IRD is committing more time and resources to ensure the tax is paid.
Summary
The Real Estate market has historically moved in an 8 to 10 year cycle and nobody can guarantee when a cycle has hit rock bottom or its high, however there are enough indicators both nationally and internationally to say that the worst of the Recession is past. Whether you should buy or not buy a property currently is ony a decision you can make. Waiting for everyone else to go first may be the safest option but owning a more suitable or more modern home for you and your family to live in over the next few years is not something that should be left out of the equation as there is an enjoyment of life factor that can outweigh financial considerations. Your Bank will be able to advise you of your financial situation for buying another property and your Lawyer will also be ale to give independent legal advice. I strongly urge you talk to both befor putting pen to paper.
Mark Stevenson
Director, AREINZ, MGAANZ, First National Ambassador
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