BILD 261 Building Economics
Project 1
Economy Advisor – Individual
Article 1
House prices surge in spite of loan restrictions
Anne Gibson’s article from
the NZ Herald goes into significant detail about how the new lending
restrictions brought into regulation in October 2013 are going to be of impact
in the future. With the new tighter lending restrictions which means;
"Banks will be required to restrict new residential mortgage lending at
LVR’s of over 80 percent (deposit of less than 20 percent) to no more than 10 percent
of the dollar value of their new residential mortgage lending."
(Reserve Bank of New Zealand) . The article goes onto mention about
how the prices are still rising despite it being harder for home buyers to buy
properties.
These restrictions have
put an effect on demand but could potentially have fled off
sellers as well, with listings being fewer day by day this keeps the
housing market tight and house prices still increasing especially in Auckland's
property market. (Smith)
An economist stated that
as interest rates rise over the year this then would have a flow on effect
with price inflation to the property market and would ease over 2014. With
properties being few and far between in Auckland and Christchurch the low
levels of supply vs high levels of demand will take continue years to even
out however construction taking place and growing. (Smith).
National marketing manager
Paul McKenzie stated that buyers will be effected most as prices will be
increasing, however listing numbers will be decreasing. (McKenzie).
The LVR restrictions that
were put in place did not have the attended effect as first time home buyers
were getting around the 20% deposit through other means of borrowing. (Duncan).
The above article
relates to Welly Real-Estate as it mentions how the lower end of the scale in
terms of the property market has been effected by the LVR restrictions and how
this effects first time homebuyers.
Work cited:
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
Article 2
More people choosing to rent
James Weir’s article in the
Dominion Post impliments how home ownerships is dropping further and further.
This means less people own their own homes. In the 1990's studies showed that
close to three out of four families owned their own homes. Now days this has
dropped by 65%. The age gap that thus fell mostly for was people in there
thirties and forties.
The house pricing
increase/boom from in the 2000's could reflect the decrease in households
owning their own homes.
In the house price boom in
2000 "house prices peaked at close to 6 times the average disposable
income"
First time home buyers and
the younger people are finding it more and more difficult to buy into the property
market, this could be due to one of two things either prices have sky rocketed
to over 6 times the amount of disposable income, people are not settling down
until an older age now and more Asian migrants are coming to NZ resulting in
renting rather than buying.
With high house prices renting
is the next best thing financially. “Recent research suggests on average it is
about $138 a week cheaper to rent than own a house”.
Its not as easy for
homeowners to up root for different circumstances as it is for renters as there
money is tied up in there asset. From 2001 to 2013 home owning has decreased by
54.6% over a range of age groups between 20-70. From 2001 house price started
to rise significantly and the gap between renting and buying has widened
greatly.
One thing that buyers have
on renters is that they can have potential capital gain.
References:
Advice for the company
Advising Welly Real- Estate:
Welly Real Estate is a real
estate agency that aims to assist commercial needs in an innovative and dynamic
way. In relation to my two articles selected I have gathered information
relating to the real esate situation to date and todays market all around NZ.
The property market is at an all time high in terms of house prices, interest
rates and mortgage rates thus this means that the housing industry is becoming
more of a worry to future investors wanting to buy a house. Leading on from
that in 2013 the new LVR lending restriction come into laws stating that
potential buyers had to have a 20% house deposit before purchasing and
borrowing off the banks which in turn meant that for first time home buyers to
now get a foot in the door in the property market is increasingly difficult.
To advise the company on the
market situation would dem hard as the market is very unstable in the lower end
of the scale, this is due to the LVR restrictions. Advise to the company would
be too focus more on the higher scale end of the market as this is feasibly
more stable. In consideration with this the company may have to employ a more
qualified professional and someone that is able to achieve those targets and
professionalisim of selling more elligant and expensive properties. With
emplying this college in there business would have the a down fall resulting in
higher wage costs but then would balance out with the increase in commission
the company would get for the higher sales price of the house. So as the
company focused on the expensive side of residential properties this would
result in an increase in wage costs, a decrease in number of houses sold and an
increase in commission per property which in turn should balance out and allow
for stability and income for Well Real estate.
In relation to other
relaeste companies throughout NZ the ones in the higher market are deemed more
of a success to those in the lower end! Proof of this is as followed:
Relating Micro and macro
economic terms to this:
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