Property prices poised for challenging times: ANZ
The housing market is posed for some challenging times and house prices will probably fall, according to the ANZ National Bank's eight property gauges.
Thursday, October 22nd 2009, 2:44PM 
4 Comments
by Paul McBeth
Recent rises in long-term fixed mortgage rates may start to dampen optimism in the property sector after record low rates, rising net migration and an under-supply of houses underpinned the sector over the past few months.
"A belief that the worst of the economic crisis is now behind us, combined with relatively attractive borrowing rates, has spurred the housing market into action," the bank's economist said in their report.
Of the eight indicators, one was positive, two were neutral with a positive bias, one was neutral, one was neutral with a negative bias, and three were negative.
Serviceability, liquidity and globalisation were all negative, and would require more time before they turned around.
Interest rates were neutral with a negative bias with another round of fixed rate rises contrasted a further easing in floating rates.
Affordability was neutral with higher mortgage rates taking the gloss of the cheap money of the past year.
Supply-demand balance and consents and sales remained neutral with a positive bias, with the summer months likely to see an increase in the number of available listings.
Migration remained positive for house prices, as the number of people entering New Zealand continues to outstrip the number of those leaving.
ANZ concluded that the outlook is still unclear, though it will be looking for a "stunner" in the warmer months of the year.
Paul is a staff writer for Good Returns based in Wellington.
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Comments from our readers
I live in Wanaka and have owned property in this area for more than ten years. If you purchased your properties in the last 2-3 years as it appears from your email, you probably purchased at the "top" of the market-though of course no one rings a bell to signal the "top" (or the bottom for that matter), such analysis is always done in hindsight. If you don't need the dough and the holding costs aren't hurting you, I suggest getting them rented and wait it out. Or if you aren't already living here, then get down here! At least for holidays-as you say it really is a beautiful location. The Wanaka property market is somewhat "frothier" more pumped up than other places given it's resort labelling and the property price inflation circus carried on here a little longer than in other places in NZ; thus you can reasonably expect the turnaround to come a little later. The world is a different place (financially) now compared to 2-3 years ago, and the days of buying a property in Wanaka and flicking it on after 12-24 months with an almost guaranteed capital gain are long gone and probably not coming back in the forseeable future. Besides who needs IRD crawling up darker bodily orifices with a torch looking for evidence of property trading.
Get some good, long term tenants in and if the properties are leveraged then fix your mortgage rates ASAP for as low as you can screw your bank down to. Some of the risks with running rentals in the cities don't really exist here yet; if you get good tenants in then you might even avoid having to have a rental manager as you can do the inspections yourself as you'll be coming down here to live if you aren't already here! Or at the very least holidaying regularly!
Things will come right for your properties in Wanaka-if your circumstances allow then I really think taking a longer view is the way to go.
One other thing, watch those Wanaka Real Estate agents. Two to three years ago somewhere between 1 and 2 percent of the entire permanent population in Wanaka was hawking real estate and a big dollop of the froth in the property market here was due to agents doing their level best to create demand and generally hype things to the maximum. It's just what they have to do when there is total reliance on sales commission to eat and pay the bills.
Your house will be worth millions in the future but you will not be any richer than you are today.
Sell your properties and invest in productive commercial enterprises which have inflation adjusted pricing power.
On one level I completely agree with you-the notion that we were all going to improve our standard of living and increase wealth by selling property to each other is fundamentally flawed. However, my suggestions with regard to the situation that Chris is in make a general assumption that the capital he has tied up in the two properties isn't required immediately. Obviously if he needs the cash, he needs to unload those properties. My suggestions come with risk attached-property prices could tank completely, tax rules around property/rentals could be changed at short notice, capital gains tax, land tax or something similar to extract revenue from owners of multiple properties; who knows. Of course there are risks around investing in commercial enterprises too. There is an element of having to take a punt if Chris wants to stay in there, wait things out and not crystallise what is so far just a paper loss. A "hold em" strategy might not even get Chris back to par in the medium term (or longer) but it might reduce the loss that would likely be crystallised with a sale now or in the short term. Just one other thing-the yield on rental properties in Wanaka relative to their capital value is absolutely pathetic; I would guess amongst the worst in NZ.
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