Sunday, 27 April 2014

Updated Draft for Project 1

Draft 2
BILD 261 Building Economics
Project 1; Economy Advisor – Individual
Amber Haddock

Article: House prices surge in spite of loan restrictions. By Anne Gibson.

Anne Gibson’s article released by 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 forecasts the effect of prices rising further despite it being harder for home buyers to buy properties or get into the property market. 

These restrictions have put an effect on demand but could potentially have fled off sellers as well; with listings being fewer 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 listings being fewer in Auckland and Christchurch the low levels of supply vs high levels of demand will take years to even out however construction taking place in these areas is growing rapidly (Smith).

National marketing manager Paul McKenzie stated that buyers would be affected 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 article released by NZ Herald relates to Welly Real-Estate as it forecasts how the lower end of the scale in terms of the property market has been affected by the LVR restrictions and how this affects first time homebuyers. The LVR restrictions are a branch in the market under Macroeconomics that deals with the performance, structure and behavior of the market.



Article: More people choosing to rent. By James Weir

James Weir’s article released by the Dominion Post implements 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 aged 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. 

The article released by the Dominion Post relates to Welly Real-Estate as it forecasts how due to the lack of supply vs demand more people are choosing to rent as it is more suffice. The result of supply and demand is a branch in the market under Microeconomics that deals with the smaller part of the market in terms of the decisions made and the implications on individuals.




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 estate 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. 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 deem hard, as the market is very unstable, the lower end of the scale in terms of house prices is very weak, this is due to the LVR restrictions. Advise to the company would be too focus more on the higher end scale 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 professionalism. Having to employee someone that required a higher wage cost would mean the business would have a slight down fall, resulting in higher wage costs however would balance out with the increase in commission the company would receive for the higher sale prices of the house. In relation to other real-estate 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: Premium real estate in Auckland New Zealand is a real estate agent that “has been building a wealth of experience and knowledge in the high-value, luxury property market”. This particular agency is a company that is known for is stability and solid property resource that can be relied on. Welly Real estate could follow the lead in becoming a successful company like Premium Real estate.

So if the company focused on the high-value luxury property markets this could result in an increase in wage costs, a decrease in number of houses sold and an increase in commission per property that in turn should balance out and allow for stability and income for Welly Real estate just like Premium Real estate in Auckland.

Another nieche in the market that Welly Real Estate could move the business towards would be to become a real estate agent that focuses on Property Management in residential properties. Due to people choosing to rent more because of the supply of housing being in decline the business could be in financial gain by focusing the business in this particular aspect. Taylor Property Plus located in Wellington New Zealand is a business that operates as residential properties managers and allows for exceptional services. Kelvin and Rae Taylor whom run the company have over 230 properties that they manage which would be of evidence that this type of business is successful.


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


(Referencing like above still needs to be done for article 2 and advise section)

2 comments:

  1. Hi Amber
    Good to see your project 1 post.
    Just a few things to review before Wednesday hand-in to improve your writing.
    - Check whether the in-text citations are meant to be italic, not sure if they are.
    - Be careful with the referencing, double check full stop and quotation mark placement. Simple mistakes but easy to fix and will improve your grade.
    - You have very short paragraphs, make sure that it is a formatted paragraph with topic sentence, evidence and conclusion as random quotes or information are not helpful when creating an argument.
    - Check sentence structure, and clumsy sentences
    - vs. wold be more correct as versus.
    - Check clumsy sentences like ….”dropping further and further” could just be dropping?? Remember make it sound academic, same with “finding it more and more difficult”
    - Check when you say ‘my’ and ‘I’, not academic and could be reworded to make more formal.
    - You need to reference your advice section more, where are you getting the figures.
    - Eg. “higher end scale of the market as this is feasibly more stable.” Where did you get this information??
    - Everything you quote needs a reference…otherwise it is plagiarism.
    - If you can find more references by Wednesday to strengthen your argument that would be beneficial.

    ReplyDelete
  2. Thanks Catherine will work on this before Wednesday, is the hand in on this blog or R drive?

    ReplyDelete