Hayden Fahey Canterbury-rents-set-to-hit-Auckland-levels

http://www.stuff.co.nz/business/industries/10124295/Canterbury-rents-set-to-hit-Auckland-levels

Christchurch rental properties are the most sought after in the country (New Zealand Herald, 2014). Canterbury continues to have the fastest-growing rental growth in the country, up nearly 15 per cent in the year to April. Post-earthquake housing shortage and rebuild activity continued to affect rents, which were likely to reach Auckland levels by the end of the year if the trend continued.

In Christchurch houses with five or more bedrooms saw rent rises of 4 per cent during the year at $643, and 5.2 per cent for four-bedroom homes at $501. The average rent for three-bedroom houses rose 4.5 per cent to $388, 4.2 per cent for a two-bedroom home at $337. and 3.4 per cent for a one-bedroom property at $261. Auckland's rental growth by comparison was about a quarter (HARRIS, 2014).

The large demand from people requiring houses for accommodation after the Christchurch earthquake without the abundant supply has raised the price for rental property. The large housing demand by earthquake offers a reliable tenancy base for property owners. Rental property investors in Christchurch are experiencing high profit margins. High profit margins can be expected from rental investments because property prices are relatively cheap in relation to the rental income received (Harris, 2014).

Christchurch’s average weekly rents for the three months to April were $431, nearly 11 per cent higher than the same period a year ago. Auckland's house prices had grown 13.5 per cent in a year, 28 per cent since the start of 2012 and were 50 to 56 per cent higher than the other regions (HARRIS, 2014).

The successful rental yields are attributed to economic model of supply and demand. There is a high demand for residential rental properties in Christchurch currently created by a continuous demand for earthquake victim’s accommodation and a recent demand for Christchurch rebuilders. The rental boom from Christchurch can be expected to diminish as renters return to their city after properties have finished construction or more properties become available to the market (Chaston, 2014) (Harris, 2014).

Buying a house in the current property with debts has become very expensive. This is a direct result from the Reserve Bank initiating restrictions on low equity mortgages in October last year. The Reserve Bank restricted the mortgage market, making mortgages with a deposit of less than 20% difficult to get. This impacts first home buyers who are mostly unable to purchase property. The LVR has affected mainly the lower value properties in the market (ONE news, 2014). The Reserve Bank initiated this restriction in an effort to control the market for the country’s long term benefit. This is macroeconomics as it adjusts the market behaviour directly (Reserve Bank of New Zealand, 2013). Therefore with LVR restrictions first home buyers will be deterred from purchasing a new house without proper funding. Prospective first home buyers will look to rental properties instead of purchasing as LVR restrictions do not affect the rental property market (Chaston, 2014).

Welly Real Estate should invest in residential property for rental opportunities. Due to LVR restrictions throughout New Zealand Prospective first home buyers will look to rental properties instead of purchasing as LVR restrictions do not affect the rental property market. This creates a large opportunity that Welly Real Estate could invest in. Rental properties in both Auckland and Christchurch should provide improving rental yields. With residential properties throughout the country becoming increasingly expensive for purchase and limited properties available, rental properties are becoming more popular. Property management in rebuilding Christchurch is an economically viable option in the current property market for Welly Real Estate.

Chaston, D. (2014, May 29). The Rent or Buy report for March 2014 - New Zealand. Retrieved June 6, 2014, from Interest: http://www.interest.co.nz/property/rent-or-buy

Harris, C. (2014, May 29). Canterbury rents set to hit Auckland levels. Retrieved June 5, 2014, from Stuff: http://www.interest.co.nz/property/rent-or-buy

New Zealand Herald. (2014, January 18). Christchurch rental property demand soars. Retrieved June 5, 2014, from New Zealand Herald: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10779460

Ninness, G. (2013, December 21). Stuff. Retrieved April 2014, from http://www.stuff.co.nz/business/money/9539298/Insider-guide-to-investing-in-rental-property

ONE news. (2014, April 24). LVR taking a chunk of low price sales out of housing market. Retrieved May 1, 2014, from ONE news: http://tvnz.co.nz/business-news/lvr-taking-chunk-low-price-sales-housing-market-5939958

Reserve Bank of New Zealand. (2013). Loan-to-value ratio restrictions. Retrieved April 26, 2014, from Reserve Bank of New Zealand: http://www.rbnz.govt.nz/financial_stability/macro-prudential_policy/5393159.html

Hayden Fahey - Property values rise again after a period of flattening off

http://www.qv.co.nz/resources/news/article?blogId=152

New Zealand property values took a downward turn last month and predictions were that this would level out, but instead the trend show values are starting to increase again. The New Zealand residential property market has recently experienced a plateau in property values. This plateau has been short lived and now house values continue to rise. The plateau was a delayed response in the market from the Reserve Banks introduction to Loan-to-Value restrictions. Nationwide property values rose only slightly in contrast to earlier market trends, indicating a plateau in property values. Since this plateau the values began to rise once more, this time at less of a rate.

New Zealand is in a current property boom. This property boom was created by a strong demand for housing and a limited supply. Auckland’s limited housing supply has contributed to raising house prices throughout the city, creating over-priced properties. Nationally the inflation-adjusted annual property value increase was 7.7 per cent. This large increase in prices has made it difficult for home buyers to purchase property (Backhouse). The cost of owning property is increasing at the fastest rate since 2002 (One News).

Buying a house in the current property market with debts has become very expensive. This is a direct result from the Reserve Bank initiating restrictions on low equity mortgages in October last year. The Reserve Bank restricted the mortgage market, making mortgages with a deposit of less than 20% difficult to get. The expected impacts of this restriction were that first home buyers would be un-able to purchase property, showing a lull in the property market. The Reserve Bank initiated this restriction in an effort to control the market for the country’s long term benefit. This is macroeconomics as it adjusts the market behaviour directly (Reserve Bank of New Zealand, 2013).The short lived plateau was believed to be the result of the LVR restrictions set in place. This has proved to be mainly un-true as property values are still increasing.  Property growth in the Super City region continues to rise, up 13.9% year on year and 1.5% in the past three months (QV, 2014).

First home buyers were not expected to purchase property with the LVR restrictions in place, limiting the property demand and reducing value growth (Landlords, 2014). The latest monthly QV Residential Price Movement Index shows that nationwide residential values for April have increased 8.4% over the past year, and 0.2% over the past three months. QV Valuer Bruce Wiggins said, “Values are still increasing but at a slower rate than last year and some properties are taking a little longer to sell.” This could show that sellers are needing to re-align their sale price expectations to the true market trends and the fact that market conditions are less competitive than they were prior to October last year when the LVR speed limits were introduced (QV, 2014).

With the brief property plateau the LVR restrictions for first home buyers showed signs of being deterred from purchasing new houses without proper funding. The LVR changes may have forced first home buyers to wait and save a larger deposit or look elsewhere for finance (Landlords, 2014). With prospective first home buyers will look for cheaper housing such as renting.

The LVR restrictions have showed an impact on the market with the plateau. This impact was not as large as expected by the reserve bank as it was a short lived lull in the property value average. Properties continue to rise in value as they did before the plateau, this time at less of an extent.

First home buyers are still purchasing houses causing the house values to raise despite the LVR restrictions in place. However the small increase in values shows that the market is susceptible to the LVR restrictions and it is likely that the values will drop as anticipated. This likelihood is why it is wise to invest in rental properties in place of lower value first home buyer properties.

Advice for Welly Real Estate would be to invest in residential property for rental opportunities. Due to LVR restrictions throughout New Zealand prospective first home buyers will look to rental properties instead of purchasing as LVR restrictions do not affect the rental property market.

QV. (2014, May 8). Property values rise again after a period of flattening off. Retrieved May 8, 2014, from QV: http://www.qv.co.nz/resources/news/article?blogId=152

Established families or wealthier clientele that are looking for property would be largely un-effected by the LVR lending criteria.

Backhouse, M. (2014, February 21). New Zealand Herald. Retrieved March 12, 2014, from http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11207102

Landlords. (2014, April 7). Price rises plateau: QV. Retrieved May 1, 2014, from Landlords: http://www.landlords.co.nz/article/5031/price-rises-plateau-qv

ONE news. (2014, April 24). LVR taking a chunk of low price sales out of housing market.Retrieved May 1, 2014, from ONE news: http://tvnz.co.nz/business-news/lvr-taking-chunk-low-price-sales-housing-market-5939958

Reserve Bank of New Zealand. (2013). Loan-to-value ratio restrictions. Retrieved April 26, 2014, from Reserve Bank of New Zealand: http://www.rbnz.govt.nz/financial_stability/macro-prudential_policy/5393159.html

Joshua Foster - NZ housing market most overpriced

NZ housing market loses steam

Wilson Collin

300238419

Blog 1 (revised)

http://www.stuff.co.nz/business/industries/9813920/Lower-tax-take-sees-Govt-deficit-blowout 

Government Spending

The current Government policy aims to reach a $75M budget surplus for the 2013/14 year (CHAPMAN, 2014).

With a tax deficit of $637M we can expect to see further restrictions on Government spending in the immediate future. (SMALL, 2014)

In Wellington City the NZ Government contributes to more than 30% of office spacing in the CBD. With restricting Government spending vacancy rates in the capital have increased. This will drive prices down further and leave offices empty.

This is expected to have a negative effect on Welly Real Estate as we can expect Welly to follow the capitals lead as Government spending contracts over the next year.

This decrease in Govt. spending will drop the demand for office spaces in Welly, increasing vacancy rates and will push prices down. This will mean a lower commission and less business for Welly Real Estate.

As the Government continues to contract vacancy rates of office spaces will increase. This will reflect directly as a decrease of income for Welly Real Estate.

 

I think it is important for Welly Real Estate to keep its foot hold in the Welly office building market. Schouten states “generally corporates and government agencies were static (2012), but growth was coming from companies with between three and 10 staff” (SCHOUTEN, 2014).

For Welly Real Estate temporally moving away from big cooperates to helping smaller upcoming businesses could cause them to pick up some valuable clients.

Works Cited

CHAPMAN, K. (2014, 05 16). Government surplus on a knife-edge. Fairfax Media.

SCHOUTEN, H. (2014, 01 25). Squeeze is on for office space in the capital. The Dominion post.

SMALL, V. (2014, 03 11). Lower tax take sees Govt deficit blowout. Fairfax Media.

 

Comercail Properties booming

http://www.stuff.co.nz/dominion-post/business/commercial-property/10066417/Good-returns-for-commercial-landlords

http://www.stuff.co.nz/dominion-post/business/commercial-property/10055389/City-office-block-sold

Amber Haddock "LVR rules may go by year end"

http://www.nzherald.co.nz/residential-property/news/article.cfm?c_id=76&objectid=11252242

Blog 15

Tamsin Parkers article published by The New Zealand Herald forecast how the LVR restriction rules that were implemented in Oct 2013 maybe removed by the end of the year, this is because pressure in the housing market is decreasing. House sales volumes have dropped throughout New Zealand apart from in the Canterbury region.

If the LVR restrictions are removed inflation might increase by 2.5% however in the short term have had the intended purposes required, as planned by The Reserve Bank of New Zealand. A chief advisor mentioned that the property market is less vulnerable so banks are more inclined to lend money to those with a high risk.  

The earliest date that the reserve bank would look at removing the restrictions would be the end of 2014 and would only do so provided that they were confident that the property market would respond to the increase in interest rates. The RBNZ intention was to remove these restrictions end of 14/ early 15 as expected (Leung). There was some leniance for banks to increase their restricted lending "given the share of new lending came in at 5.6% for the first two quarters" this is well under the 10% margin (Leung).

The discussions as per the loan restrictions in a meeting with Dominick Stephens a employee of Westpac said that there was a very sure answer of to questions regarding the LVR and the limits. If the house market took off again this could mean the restriction rule will push out into 2015, however are it very clear this was unlikely to happen (Stephens). The Reserve Bank made a statement that the OCR (official cash rate was unlikely to increase by such a high rate.

Floating mortgage rates were predicted to be around 7-8% which is indicative of the previous 20 years in New Zealand, economists predicted that they could reach this high by the end of 2014. Interest rates were unpredictable as to whether they will rise and to what extent and this could be all caused by what is happening in the property market (Stephens). 

Main focus point featured in the article: LVR restriction might go by the end of the year as the market is become more stable.

The article published by the New Zealand Herald relates to Welly real- estate as states how the LVR restrictions may be removed and this means that the market has an increasing stability rate and first time home buyers maybe able to enter back into the lower end scale of the market.

Advising Welly Real estate: If the market for housing is slowly becoming more stable this may give Welly Real Estate the opportunity to expand on particular housing right throughout the market from million dollar mansions right down to first homes. This will expand the business and although the sale of a house for a property for those of a first time home would be a lot less than that of the higher scale this would in turn mean that a less qualified professional would be needed. I.e. less salary/wages.

Works Cited 

Parker, T.  "LVR rules may go by year end". New Zealand Herald. 09 May. 2014. http://www.nzherald.co.nz/residential-property/news/article.cfm?c_id=76&objectid=11252242.  Article. A4.

Smith, D. "House prices surge in spite of loan restrictions". Web. March 10. 2014. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11213979.

Duncan, H. "House prices surge in spite of loan restrictions". Web. March 10. 2014. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11213979.

Reserve Bank of New Zealand. "Loan to valure ratio restrictions". Web. March 10. 2014. http://www.rbnz.govt.nz/financial_stability/macro-prudential_policy/5393159.html

Amber Haddock "First-home hopefuls cautioned"

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11252587

Blog 14
Jamie Mortons article published by the New Zealand herald forecasts readers as to how first time home buyers struggling to purchase into the property market shouldn't get there hopes up any time soon as bank lending may be "lifted" says banks and real estate agents. Grant Spencer from The Reserve Bank said the LVR restrictions implemented last year, that stated those with less than a 20% deposit would be turned away however these restrictions may be gone by the end of the year (Spencer).

"Pressures in the housing market were starting to ease" (Spencer).

The number of house sales has dropped everywhere in New Zealand apart from the Canterbury district post earthquakes. If the LVR restrictions are fled then inflation could rise by 2.5%. However banks are less inclined to be frightened away by potential credit losses.

Associate Professor David Tripe said the earliest The Reserve Bank of New Zealand will be looking at removing the LVR restrictions is late 2014. "Banks may continue to be somewhat cautious in their lending - one of the things about those rules having been in place is they have cemented a culture of caution. But what has also happened is the banks, in most cases, have not had enough demand for the high LVR loans to be able to even get up to the percentage cap" (Tripe). The LVR restriction was said to be removed in the late 2014/ early 2015 bracket (Leung). However the LVR restrictions will only be removed if the Reserve Bank of New Zealand is confident that the housing market is on a steady decline, and interest rates will be of expected to balance property pricing.

Professionals in the property industry have said that the LVR restrictions have missed the intended purpose somewhat as they have only really effected the lower end of the scale where as those in the higher end of the scale are prepared to pay (O'Sullivan).

Main focus point featured in the article: If LVR restrictions are removed this could be of cause to inflation rising to by 2.5%.

The article released by the New Zealand Herald relates to Welly Real estate as it implies instability in the market if the LVR restrictions were to be removed meaning that if inflation occurs this effects mortgage rates and would in turn affect house sales.

Advising Welly Real estate on the current situation based around this article would be to again focus on the property sales on the higher scaled end. Even though housing prices and LVR restrictions are easing, the effect is predominately on the lower end, so focusing on the higher scaled end would deem a safe option for Welly Real Estate in terms of growth for the business.

Works Cited:

Morton, J.  "First-home hopefuls cautioned". New Zealand Herald. 10 May. 2014. http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11252587.  Article. A4.

Smith, D. "House prices surge in spite of loan restrictions". Web. March 10. 2014. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11213979.

Duncan, H. "House prices surge in spite of loan restrictions". Web. March 10. 2014. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11213979.

Reserve Bank of New Zealand. "Loan to valure ratio restrictions". Web. March 10. 2014. http://www.rbnz.govt.nz/financial_stability/macro-prudential_policy/5393159.html