Wave of Rentals hit market - what comes next !!

[Bluekiwi]

Rhetorical question of course.

My question brings me back to 1998 when I was under pressure.

As houses havent sold at the price hoped for, many vendors are putting their house up for rent rather than take the hit on price.
This will in the end turn round and bite a lot of these people on the bum and I will explain why.

101 supply and demand, rents are going to start coming down in the short term.
Potential vendors who decided not to take a hit on price selling now will start to be further squeezed by high interest bills (and there own cost of living, and less job security) on one side and lower rent on the other side.

Immigration is falling and unemployment is rising in this mini-depression we are having, consumer is getting squeezed by the cost of living and will shack up with friends and family.

Rental demand drops further.

This will lead to a spiral of lower rents short term 2008 to mid 2009.

What does this do, this sends a lot more vendors to the wall who now HAVE to sell, probably later 2008 and early 2009, the ones who stubbornly havent sold now when they should have.

They will sell at lower than what prices are now because they have to, a double whammy of higher holding costs and negarive capital growth.

End result: House Prices fall substantially further next 12 months.

[muppet]

Last edited by Bluekiwi: date:time: today Reason "Cant Spell"

Then use your spelling checker.

[Bluekiwi]

Change your Groucho Marx

Then use your spelling checker.

Each to his own

[cube]

As reported in the Herald

Activity in the housing rental market is surging as vendors hold off on selling during the property slump.

A survey by real estate company First National New Zealand suggests more homeowners are choosing to rent their properties rather than sell them and receive a low price.

"Many sellers are choosing to rent out their properties themselves so the real size of the increase is hard to quantify but the numbers of rentals being advertised have increased markedly," said John Stewart, general manager of First National NZ.

He said that in Rotorua rental property ads had more than tripled from 70 to 220 in June.

In East Auckland and the northern suburbs of Wellington, rental prices rose 10 per cent and 16 per cent - which he said was surprising given that rents usually dropped when availability increased.

"Major newspapers are also featuring more rental ads than usual," Mr Stewart said. "While winter time is traditionally a little quieter and rental numbers can increase, our agents are saying this is more significant."

He added that migrants were "propping up pockets of the market in some areas".

"While one might conjecture on the effect increased fuel prices might have on rentals further out of towns and cities, there is no evidence of a preference to shift back to central locations yet."

First National released its survey as another national estate agency reported a middling Auckland property market last month.

Barfoot & Thompson said Auckland property prices eased 1.7 per cent on the month in June, with an average sale price of $525,316.

There were 556 transactions, well behind the 1000 sales recorded in June last year, but an improvement on the 453 April and 515 May sales recorded.

Managing director Peter Thompson said: "There is a clear pattern emerging where vendors are hesitating to list their properties for sale unless they have to.

"We recorded 1214 new listings in June, which is the lowest figure this year to date.

"Some vendors are still reluctant to meet the market in terms of price expectations but that's probably just an issue of time. Vendors who need to sell within a reasonable timeframe need to be realistic about what the market will bear at this time."

The company said its property management division reported a steady market in June, letting 610 properties during the month for an average weekly rental of $391, in line with the average to date this year.

WHEN STAYING PUT MAKES SENSE

Rowan O'Connor is one of the many New Zealanders keeping a watching brief on the housing market.

The Auckland-based owner of three rental properties said he first had his three-bedroom Langholm house on the market at $274,000.

But after dropping $20,000 from the asking price and still getting no joy, he decided to hang on to it "for the time being".

"We had some tenants in there who left it in a pretty average condition and [we] did it up really nicely," he said. "We figured it was better to sell than get tenants in to do the same thing again but it just didn't happen.

"It got to the point where it was worth more to rent rather than sell."

Mr O'Connor said he was able to increase the rent from $255 to $315 a week and is happy to keep it that way.

"We'll keep an eye on the market. I don't want to hang on to it forever but in a year or two we'll see how things are looking."

Those of you familiar with Kieran's property game will recognise that the influx of un-saleable properties on to the market leading to pressure on rentals happens well in to the slump. Tick....Tick....Tick.....

As BK points out, rents can only drop so far (and, I would speculate, that isn't very far), before the financial pressure becomes too much to bear, and unwilling and unwitting landlords off-load their property.

cube

[Tucker]

You have to remember too not all properties that were on the market and then taken off again were rentals. A lot were home owners looking to sell to upgrade or for whatever reason and now are just staying put. I have had a lot of people looking at a couple of my properties and the market didn't worry them they were just looking to upgrade. The problem with some of them is they wanted to sell their property first but they couldn't so they just stayed put. Out of the rest a couple rented their home out and then bought and the remainder either did sell or were cashed up ready to buy.

A lot of us here are assuming every property on the market is a rental.

[tim360]

This has been said before but if a vendor can't sell their property and so they rent it out, where do THEY go? They still need somewhere to live. Logic would say they just rent a cheaper property, but doesn't that make it neutral as far as the number of rentals on the market go?

[Monid]

The thing people aren't considering is that the number of people per household is flexible. I believe in times of economic stress the number of people per household increases (surprise surprise...) In other words Tim, they move in with the parents or friends for the meantime, meaning that it isn't neutral... Cheers David

[alhoon]

The average per house hold is around 2.8 does anyone know how high it got in the last slump.

Allan

[OllyN]

Crowded house

Household crowding 1991-2001
check out this link:

http://www.stats.govt.nz/analytical-reports/monitoring-progress/living-stds-health/housing.htm

It gives a clue that in the recession following the 1987 share market crash, housing was the most crowded from 1991 reducing slowly after that. Pacific Islanders and Asians were the worst affected.

I think this gives support to Monid's view that in tougher times people move in with friends and parents thereby releasing more rentals into an already over supplied market.

[Monid]

Thanks for that Olly, I was feeling too lazy to do the legwork necessary to find the stats.

Cheers
David

[Bluekiwi]

Household crowding 1991-2001
check out this link:

http://www.stats.govt.nz/analytical-reports/monitoring-progress/living-stds-health/housing.htm

It gives a clue that in the recession following the 1987 share market crash, housing was the most crowded from 1991 reducing slowly after that. Pacific Islanders and Asians were the worst affected.

I think this gives support to Monid's view that in tougher times people move in with friends and parents thereby releasing more rentals into an already over supplied market.

Part of my point.

[garkenro]

THE TOUGH TRUTH

What sellers need to know.



by Neil Jenman

Right now, in a lot of areas of Australia, there are a lot of unhappy property sellers. They can't sell.

In some areas, some properties have been on the market for six months, even longer.

To sellers, an on-going unsold property can be mental agony. It's like torture. They all have a breaking point, the day when they say, "Enough, I can't take it anymore, just sell it."

Ironically, once they make that final decision to sell - no matter what the price - the sellers' moods usually lift. It's gone. They can get on with their lives.

In an instant, these sellers go from unhappy to happy. There is nothing like a sale to improve the mood of even the most stubborn seller who owns the most hard-to-sell property.

Sadly, though, most sellers who have taken a long time to sell have usually sold for a much lower price than they should have accepted.

It need not have happened this way.

There is no need to wait a long time to sell for a low price, no matter how tough the market might be.

And yes, things really are tough in many (soon to be "most" and then "all") areas of Australia. This time last year, one agent (on the Gold Coast) was getting around 250 enquiries a week from property buyers. Recently he got 21 enquiries for the week.

Another agent (in western Sydney) said, "We thought our phones had been cut off on the weekend. No one called." It's a similarly emerging story in Melbourne, Hobart, Adelaide and Perth.

So, if you're an unhappy seller and you can't sell, here's some tough truths you probably need to face - quickly.

First, understand this truth: There is no such thing as a property that "can't" be sold. There are never "no buyers".

Yes, times might be tough for sellers. But tough does not mean impossible. It is always possible to sell a property. There is always a buyer. It all depends on the price.

"Oh, but we've already tried that," say some sellers. "We've dropped the price $50,000 and there are still no buyers around."

Nonsense.

Let's use a tough truth to kill the "no buyers" excuse once and for all.

No matter what price you want for your property right now, no matter how many times you may have lowered the price, ask yourself this question: "If the price was half what it is today, would it sell?"

In most cases, the answer is, "Of course."

"But we're not going to give it away!"

I am not suggesting you give it away. What I am suggesting is that you stop saying (or believing) that there are "no buyers".

If your property was half its current price, there'd be a buyer for it. So don't say "no buyers".

And no, I am not suggesting you sell your property for half its value.

What I am suggesting, very strongly, is that you realise a tough truth - if your property is not selling, then, somewhere between the price you are asking for it and half the price you are asking for it, is the price it could sell for today.

The tough truth of a tough market for sellers is this: It's not "no buyers" that's the problem, it's that there are "no buyers" at the price being asked by the sellers.

So, if you really want a buyer, just lower the asking price. Still no buyer? Lower it again. Repeat process until a buyer says "yes".

And then, of course, once you have found a buyer, you then have a choice - you can sell or stay.

But, right now, at the price you want - and if there are "no buyers" at that price - then, as tough as this may be to accept, you have no choice. You have to stay. Or, you have to do what lots of sellers are doing right now. Play the waiting game.

"We'll just wait for the right buyer to come along and pay our price." Many sellers make such muscle-flexing statements. In the real world, though, it doesn't work like that.

The longer you wait the less chance you have of finding that elusive "right buyer" or the one who, perhaps, is too silly to realise that a property is over-priced.

Face another truth. In this high-tech age, property buyers are smarter. All it takes is a few clicks of a mouse and they can compare your property with dozens of other properties.

They can find out the selling prices (which are vastly different from the "asking prices") of every property in your area. With one click, they can find out how many on-line 'visits' there have been to your property. The longer a property remains for sale, the lower the price.

"But the agent told us that our property is well-priced."

Never mind what the agent says, there is only one way to know if your property is well priced - someone wants to buy it. It's obvious.

If your property is not sold, it's because the price is too high.

Yes, yes, the price may be lower than you wanted, it may be lower than you were quoted, it may be lower than you were once offered; but, if your property has not sold, the market price is lower than you realise. It's always about the money.

And the property market is like any other market, at least as far as money is concerned. The buyers, not the sellers, set the prices.

Take the share market. A few months ago, people who owned Commonwealth Bank shares could have sold them for more than $60.00. Today, those same shares sell for around $40.00. That's the "market price". People who own shares understand share market truths.

Not so in the property market. Some sellers have properties that, a few months ago, were worth, say, $600,000. Today those same properties may only be worth $500,000 (that's not as big a drop as the Commonwealth Bank shares, by the way).

The difference with the property market is that, unlike the share market, property prices are not displayed on TV each night. And so, the property market is full of deluded property owners. They think their properties are worth more than the true market price.

Now, of course, none of this matters unless you are selling. If you are not selling, you can be happily deluded about the value of your property. You can fool yourself for years.

But the minute you try and sell, you cannot fool the market. If you ask for a certain price and there are no takers at your price, the market is saying "too high". Like it or not, you are being rejected.

Imagine going to a stock broker and saying, "I want $60.00 for my Commonwealth Bank shares. I don't care that the current price is $40.00, I want $60.00." The stock broker would laugh at you.

But not the real estate broker (or agents as we call them in Australia).

No, the agent will sign you up at "your price", get you to pay thousands of dollars in "marketing fees" and then, when no buyers show-up, the agent will give you the "market feedback". In the agent game, it's crunch time.

If you want to sell, the agent will eventually get you to sell by convincing you to lower your price to "meet the market" (the agents love that expression).

Now, sure, you may have fired the first agent (that rotten liar who agreed with your price). You may even have sacked the second agent (another liar who told you what you wanted to hear). You may be thousands of dollars out of pocket by the time you say to the third agent, "Please, I can't take this any more. Tell me the truth."

And then you'll sell because, finally, you'll face the reality of a tough market. Your property is not worth what you think it's worth, it's only worth - and here comes another real estate cliché - "what a buyer is prepared to pay".

There's an old Buddhist saying, "All human unhappiness comes from not facing reality squarely, exactly as it is."

Unhappy sellers are seldom facing reality. That's why their properties are not sold.

If you're selling today, don't get sucked into the "my price waiting game". Don't wait while your property gets more and more stale in the market place. Face the facts.

If the agent could sell your property at the price you're asking now, the agent would sell it.

Agents want to sell properties, that's how they get paid. Even if they tell you that your price is right, that's because, like most sellers, agents also delude themselves.

Salespeople are eternal optimists.

They don't want to look you squarely in the eyes and say, "The asking price of your property is too high." They are scared of what you might do to them. They don't want cranky clients.

Do you know what agents hate more than anything else? I'll tell you. Agents hate being fired by a seller (because they "couldn't sell" the property) and then, a few weeks later, seeing the property sold by another agent at a lower price than they could have achieved weeks earlier. That's every agent's nightmare.

So, again, I repeat. Don't play the price plummeting waiting game.

If you get a genuine offer on your property in a tough market - and there is no better offer - then, no matter how low the offer may seem, it may be a lot higher than you'll be offered in a few weeks from now. Don't reject it without some serious thought.

You've got to face the tough facts. The best price in today's market may be less than the price you want. But that doesn't change the fact that it's the best price.

Don't let your property go stale. Price it to sell it.

*****************
Found this on Neil Jenmans website and thought it a fairly interesting observation.

[muppet]

Thanks for that garkenro. Item also at http://www.propertytalk.com/forum/sh...ht=neil+jenman

[tpr2]

Hi guys

Thats an interesting outlook based upon this little excerpt from the ANZ.

Home prices to explode, ANZ Bank predicts


By Craig Binnie July 03, 2008 08:14am

• • Mother of all" housing booms coming, says ANZ
  • Chronic housing shortage will push up prices

THE ANZ Bank says the growing housing shortage is setting Australia up for the "mother of all" housing booms.

New home building figures showing slumping building approvals have sparked fears of a price and rent explosion that will price even more prospective buyers out of the market.

The ANZ's senior economist, Paul Braddick, said yesterday Australia faced a critical and potentially chronic shortage of housing.

"A growing housing shortage is setting the scene for the mother of all housing booms," Mr Braddick said.

"Demand has accelerated and rising immigration, both permanent and temporary, shows no sign of abating. Meanwhile, rising interest rates continue to stymie any building recovery.

"Underlying housing demand is already outstripping new supply, and the gap is set to widen sharply, driving pent-up housing demand to record levels," he said.

The Australian Bureau of Statistics said yesterday new apartment approvals fell 18.2 per cent in May and were down 4.2 per cent over the past 12 months.

New house approvals fell 1.2 per cent and were down 1.7 per cent over the year. In Victoria total building approvals were up 2.8 per cent.

Commonwealth Securities chief equities economist Craig James said buyers had fled the property market because of high interest rates.

"With population growing at the fastest rate in 18 years, we simply should be building more homes, not less," he said.

"Interest rate hikes have spooked investors and budding owner-occupiers.

"Investors are putting their money in the bank and people are staying in the rental market longer. But the situation is unsustainable."

Mr James said rents and house prices would be forced up because of the tight conditions, which would eventually attract more investors and lead to more building.

"The latest slump in new dwelling approvals is clearly bad news for those renting," he said.

"The supply of apartments isn't rising but the number of people wanting to rent certainly is."

Victorian rents are at record highs and housing affordability is close to record lows.

The Commonwealth Bank's senior economist, Michael Workman, said interest rates would need to start falling and buyers would need to believe prices were rising before they would re-enter the market.

The building approval slump has cut the odds of another interest rate increase from the Reserve Bank.

cheers


Terry

[Realtorman]

Neil Jenman has no credibility and has been proven wrong over many years but I must admit his advice to price your house to meet the market is startingly frank advice from such a loser.

What alot of you do not realise is that constuction has now virtually stopped so little housing stock is being added.

We are in a supply and demand situation.

New migrants need housing and most will initially rent.

We have a large outflow of pissed off Kiwis going to Aussie and some of these are selling but many are renting out their homes.

We still have more migrants comming than those going. We still have rental demand.

Our small country towns are dying as people move to the cities. This creates more demand.

People tend to buy up in housing and with sales stalled we are seeing more people stay put so creating greater demand for low cost rentals.

Whilst we have near full employment we will have increasing demand for rental property.
The crunch will come when we start to get large lay offs but will this happen?