It’s little wonder people are confused and lacking confidence when you read headlines like,
- Property listings surge, sales remain static.
- January building consents value falls to seven-year low.
- End to Auckland mortgagee sales surge some years off.
- Interest rates set to increase later in the year
Then John Stewart, First National general manager, was reported as saying 20 percent reductions were becoming more common.
As reported last year I feel there are far too many people holding on in the belief that if they hold on a little longer they will be able to weather the storm.
I was having a chat with a couple of property investors about this on the weekend. Too many know they are going to sink and don’t look for a way out as they know it is going to cost them.
It generally takes around three months before a bank serves notice and takes legal action to enter into a mortgagee situation and in many cases a forced sale could be avoided if people simply accepted that they had to sell, settle the debit, and start over.
I fear one of those headlines "End to Auckland mortgagee sales surge some years off" could become a reality if people facing hardship don’t face the situation and accept the fact that they must move on.
I really don’t think there is going to be any surge in value within the next year or two that would warrant anyone holding on.
Sales are likely to be subdued rather than static so it isn’t going to be all doom and gloom but it could very well be for those that live in hope of an overnight resurge in values.
The current state of the market has little to do with supply and demand but rather affordability and the only way that is going to change is for incomes to increase and values to remain subdued.
There is activity out there, contrary to the headline, January building consents value falls to seven-year low as residential approvals show 1042 consents issued for new dwellings last month compared with 812 in January 2009.
Read the headline again, it was only a play on words; January building consents value falls to seven-year low.
Interest rates set to increase later in the year now this is a hard one and many if not all are only guessing as the data we must rely on to make a calculated decision is so fickle. At a guess, I would have to say I do not think interest rates are going to increase sharply over the next 12 months or so.
Although New Zealand is only a small country, one should not generalise when it comes to property, as there are so many variances to take into account and figures can become distorted.
I am not sure if John Stewart’s comment of a 20% reduction in values is something that should be relied upon. In some regions and certain price brackets maybe, but in general I don’t think property values will fall by much.
People must remember if they are buying and selling on the same market the person trading up is generally better off taking a small hit, as they will make it up at the other end.
It is the people trading down that will likely be a little worse off but as I have already mentioned it is better to be left with something than nothing at all.
Due to demand, we have spent a considerable amount of time redesigning our website to better report regional market trends rather than generalising as it is was becoming increasing difficult to convince people to look at what is going on in their own regions. Sure National trends do have some impact on various regions but not all.
In fact, it is common for regions to buck national trends. For example, when a large employer sets up shop like Fonterra did in Hamilton.
Summary
- 2010 and beyond – a subdued market through 2010 and into 2011 then increasing in line with affordability.
- If you are facing hardship, face the situation and accept the fact that you must move on, as there is not a quick fix on the horizon.
- When considering interest rates think how an increase of 1% would affect you.
Yes, I know some have been popping the champagne corks and saying the recession has ended and we are on the road to recovery and I think that we are, however there are still a few bridges to mend.
We all see things differently, and any decision you make should be based on what works best for you.
Brian Dalley is a leading Property Consultant | former NZMBA Mortgage Broker, and Real Estate Agent.
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