10 good reasons to buy property now

[muppet]

10 good reasons to buy property now

4:00AM Sunday Dec 14, 2008
Andrea Milner



Ashley Church says now is a good time for property investors to make a move. Photo / Paul Estcourt

Ashley Church, a veteran property investor with 30 years' experience, tells Andrea Milner why now is a good time to buy:
1: Buyers have a choice of stock and not much competition at present.
2: Building consent numbers have fallen by 22 per cent and are still falling. Tony Alexander, chief economist of the BNZ says they are at their lowest level since the early-1990s and a homes shortage will start to show later next year.
3: New homes will be more expensive to build as the falling dollar increases the cost of importing construction material and a number of builders have left or are leaving the industry.
4: Investors have been quitting rental properties, which will lead to a shortage and rents rising. "Investors have largely disappeared from the market. Fundamentals driving the need for rentals have slowed but not stopped - rental demand is still strong; it's a recipe for a future boom," Church says.
5: Falling interest rates and tax cuts have increased the affordability of home ownership. Real Estate Institute president Mike Elford says home affordability is the best it has been for a long time. Buyers with good credit history and payment capacity are still able to secure low-deposit finance.

6: The real estate market has not imploded in the current financial crisis - prices have held steady in the face of negative media. Elford says despite slowing sales, median prices are holding.

The national median house price for last month was $337,500 compared with $335,000 in October and $352,000 for the corresponding period last year. This shows a decrease in national median house values of 4.11 per cent compared with this point last year. Alexander says house prices will decrease only 5-10 per cent by the end of the year.
They will stay flat over next year but rise in 2010. "It is quite amazing the number of people who seem to believe we should be predicting massive price declines in the face of fundamentals which suggest otherwise," says Alexander, who receives "hate mail" for refuting suggestions that house prices will fall by between another 30-40 per cent.
Church says the present property slump is nothing like that in the mid-70s when values fell 38 per cent. We won't see that this time, he says, because the drop in interest rates will allow people to hold on to their homes.
7: At the same time, vendors are now very negotiable on price compared with this time a year ago. They are increasingly aware they may need to leave some money in their property in the form of vendor finance if they want to sell, and that investor buyers look for positive cash-flow properties.
8: Positively-geared property deals can again be found all over.
9: Prices will recover and property values will increase again. The downturn in property is due to a lack of confidence rather than any change in the property market fundamentals, Church says.
10: There is nowhere better for most Kiwis to invest their money given that property has doubled in value, on average, every seven years for more than 50 years - and there is nothing to suggest that will change.
* Ashley Church is the chief executive of the Property Traders Association.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10547962

[tanmedia]

Well I don't have 30 yrs of property investing experience and a flash job leading a property trading group, but I would say that the fact that NZD sank to as low as 48 yen this week that it is probably not a good time to buy property (unless, of course, you're getting a deep discount to an already deep discount). Also, if the significance of the NZD/JPY cross is not immediately obvious, it's probably a good idea to rethink about what's going to be driving the market.

Another point that I find a little disturbing from an "industry leader" is that he starts off by giving reasonable assertions based on logic, then he runs out of steam in completing his 10, so #9 is an opinion that is parroted throughout the media and #10 is the old favorite about property behaving as a natural phenomenon.

So Mr Church gets a 1.5 out of 10 for original thought and insight, but I will give him full marks for being a very important man at the helm of a property traders group. That shows ambition and guile.

[Viking]

Can't think why he isn't right. Overseas investors haven't had it so good for a long while. Queensland is racing away with overseas investors taking up the property this year.

1 to 8 is bang on, 9 a good opinion and 10 is wrong only because property values have been doing that since property titles came into existence about 1066AD.
Bit of long term history in property value cycles.

[tanmedia]

Can't think why he isn't right. Overseas investors haven't had it so good for a long while. Queensland is racing away with overseas investors taking up the property this year.

1 to 8 is bang on, 9 a good opinion and 10 is wrong only because property values have been doing that since property titles came into existence about 1066AD.
Bit of long term history in property value cycles.

You can't think why he isn't right? While one quite obvious point to start with is when one of the primary sources of the world's speculative funding--the yen--is being repatriated because of extreme risk aversion, there is every reason to think that he's wrong. That is, of course, if credit availability has anything to do with buying property and if Australian banks have been relying on offshore borrowing (particularly sourced in yen) to fund mortgage lending. Case closed.

[Viking]

Money is still here as it is still safe in NZ.

[tanmedia]

Money is still here as it is still safe in NZ.

Nonsense. The current account deficit is one of the worst among developed countries.

[Viking]

Nothing new there. Been like that as far back as I can remember, beyond Muldoons days back to Holyoake even. Nothings changed in that dept. Was even used as one of the reasons for "think bid".

[tanmedia]

Nothing new there. Been like that as far back as I can remember, beyond Muldoons days back to Holyoake even. Nothings changed in that dept. Was even used as one of the reasons for "think bid".

So what is your point? That NZ, like America, can live outsides its means forever and a dream?

Yeah, right.

[captaincrab]

Tanmedia- they just dont get do they. Also am amazed energy still seems to get ignored.
Viking-one word for you- DEFLATION.

[67910241]

Ok, let's try a point-by-point

1: Buyers have a choice of stock and not much competition at present.

Only part true. That really depends on the area. Some more remote and less attractive areas are saturated with stock. Outer suburbs especially. However, I find the current choice around Auckland CBD very limited. The bottom did not affect the supply everywhere equally. Maybe because it's no bottom yet? Marketing/advertising/media jobs are not disappearing yet, but when they do, I don't want to own equity in Ponsonby/Grey Lynn.

2: Building consent numbers have fallen by 22 per cent and are still falling. Tony Alexander, chief economist of the BNZ says they are at their lowest level since the early-1990s and a homes shortage will start to show later next year.

Part true. In theory, there already is a shortage, like right now. In practice, no reason why one house must equal one household and the household size can't at least temporarily grow way quicker than the population.

Finally, most of "population growth" in this country happens to those that can't afford decent housing anyway let alone any deposit. Not a major demand driver as rich people procreating would surely be.

3: New homes will be more expensive to build as the falling dollar increases the cost of importing construction material and a number of builders have left or are leaving the industry.

Mainly false. Yes they will get more expensive some day, but not in the next 12-24 months. The commodity prices are dropping like a stone, quicker than NZ dollar is, and they have no fundamental bottom unlike the NZ dollar. So the materials will get cheaper. And what industry will the builders join now that they are not building anymore? Can they become dentists and teachers overnight? Me thinks they'll reenter as soon as the market starts showing any sign of life.

The good part is that the land price around Auckland is still in free fall. So buying a section and building new will get cheaper before it gets dearer.

4: Investors have been quitting rental properties, which will lead to a shortage and rents rising. "Investors have largely disappeared from the market. Fundamentals driving the need for rentals have slowed but not stopped - rental demand is still strong; it's a recipe for a future boom," Church says.

Abject marketing nonsense and a worthless argument. For every investor leaving and a renter buying there's one less property in the renter pool and one less renter household needing to rent. An absolute zero sum game. Shows the guy is utterly useless at second form maths.

5: Falling interest rates and tax cuts have increased the affordability of home ownership. Real Estate Institute president Mike Elford says home affordability is the best it has been for a long time. Buyers with good credit history and payment capacity are still able to secure low-deposit finance.

Nice to see he shows affection if not affiliation with REINZ. "They are still able to secure finance (but may not be soon)", so there may be even less viable demand in the near future. Again, a reason why not to buy yet.

6: The real estate market has not imploded in the current financial crisis - prices have held steady in the face of negative media. Elford says despite slowing sales, median prices are holding. The national median house price for last month was $337,500 compared with $335,000 in October and $352,000 for the corresponding period last year. This shows a decrease in national median house values of 4.11 per cent compared with this point last year.

Semi-good stuff, but the distribution shape has changed from bottom-skewed to top skewed so the old median is rubbish. Actually, whenever the distribution is non-normal, can't use the median reliably because it assumes a normal, bell shaped curve distribution. Dodgy stats may lead to dodgy conclusions.

Alexander says house prices will decrease only 5-10 per cent by the end of the year. They will stay flat over next year but rise in 2010.

Tony Alexander has predicted a 5% fall for 2005-06. He is not extremely well known for his accurate prophecies.

"It is quite amazing the number of people who seem to believe we should be predicting massive price declines in the face of fundamentals which suggest otherwise," says Alexander, who receives "hate mail" for refuting suggestions that house prices will fall by between another 30-40 per cent.
Church says the present property slump is nothing like that in the mid-70s when values fell 38 per cent. We won't see that this time, he says, because the drop in interest rates will allow people to hold on to their homes.

True - unless they lose their jobs.

7: At the same time, vendors are now very negotiable on price compared with this time a year ago. They are increasingly aware they may need to leave some money in their property in the form of vendor finance if they want to sell, and that investor buyers look for positive cash-flow properties.

Ok, this one I actually agree with, expect the "very" bit. Being negotiable within 5-10% of the originally asked price does not really qualify for being "very" anything imo.

8: Positively-geared property deals can again be found all over.

Not in any half-decent part of suburban Auckland. Maybe in the worst slums, and in some city apartments.

9: Prices will recover and property values will increase again. The downturn in property is due to a lack of confidence rather than any change in the property market fundamentals, Church says.

Job security and availability of employment is a massive part of the "market fundamentals" that can't be overstated. The whole price level is based the premise of an economy operating at <4% unemployment over a long period of time. This is a cardinal mistake. Such low unemployment is unsustainable. Yes, it may return some day, but for now this "fundamental measurement" is heading south.

10: There is nowhere better for most Kiwis to invest their money given that property has doubled in value, on average, every seven years for more than 50 years - and there is nothing to suggest that will change.

There's absolutely nothing to suggest that it must continue unchanged either.

Ok Ash, not bad, got about 50% right.

[Dean@Massiveaction]

You have to see it for what it is guys, free advertising for the traders. Ashley would never claim to be an expert on this current market.

As a free marketing tool it's fantastic! :-)

[tanmedia]

You have to see it for what it is guys, free advertising for the traders. Ashley would never claim to be an expert on this current market.

As a free marketing tool it's fantastic! :-)

It's also a poor indictment of the editorial credibility of one of our major newspapers that we are yet to see any intelligent reporting on what is a serious issue that will affect most NZers in one way or another.

But Pooms, you are right. It's free advertising. I don't really understand why you would say Church wouldn't claim to be an expert when he is the CEO of a property trading group. I guess it's a useful defense when someone challenges you with a meaty question (not that you'd expect that to come from the Herald).

[Viking]

NZ housing most affordable since 2005 - report

2:49PM Monday Dec 15, 2008



A sharp reduction in mortgage rates drove a record improvement in housing affordability in November, according to a new report released today.

Economic times may be tough but the good news is that housing in New Zealand is becoming more affordable.
A sharp reduction in mortgage rates drove a record improvement in housing affordability in November to its best level in 3-1/2 years, the Wizard Home Loans Affordability report showed when it was released today.
Banks and other lenders have slashed mortgage rates by around 75 basis points to an average 7.5 per cent for two-year fixed rate mortgages in November.
And rates have been cut further since the end of November after the Reserve Bank cut the OCR by a record 150 basis points to 5 per cent on December 4.
That means the proportion of an after tax median income needed to service the mortgage on a median priced home dropped to 63.9 per cent in November from 67.9 per cent in October.
The 4 per cent reduction was the biggest monthly improvement on record in the Wizard Home Loans Affordability report and takes this measure to its best level since July 2005.
The record worst level of 83.2 per cent was in November last year when house prices hit their peak. The best level was 45 per cent seen in 2002 before the house price boom.
"This will be the best Christmas in home affordability terms in four years," said Wizard Home Loans director John Grant.
"Tax cuts, lower house prices and interest rates are all working together to make housing more affordable going into 2009."
Further interest rate reductions and more tax cuts in April next year will make it much easier for first home buyers to enter the market, he said.
This year was rough for the economy and 2009 looks tough too, he said.
"But there has been a big silver lining in the form of much better housing affordability."
The report also shows an improvement in the proportion required for a first home buyer - defined as someone aged 25-29 who has saved 20 per cent of their after tax income in the previous five years and who is buying a cheaper house (first quartile price).
The first home buyer's affordability ratio improved to 54.5 per cent in November from 58.4 per cent in October and is also back at its best levels since August 2005.
The national median house price rose to $337,500 in November from $335,000 in October and is down 4 per cent from its peak in November 2007.
The biggest improvement in home loan affordability was in Southland where the ratio improved dramatically to 34.2 per cent from 44.1 per cent in October, largely because of a 17 per cent slump in the median house price there to $165,000.
There were also big improvements in Taranaki, Wellington, Waikato and Queenstown because house prices fell sharply.
The only region where affordability worsened was Hawke's Bay and Gisborne, where house prices rose.
Southland remains the most affordable region, while Central Otago Lakes (Queenstown, Wanaka) was the least affordable at 96.9 per cent, although it dropped below 100 per cent for the first time in 2-1/2 years.
- NZPA