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