Up or flat?

[kimberley]

We have heard bubble burst for a while. At the moment, there are conflicting signals from the property market, one day someone is talking about falling demand, the other day someone is talking about further strength in the market. Currently i heard strong sales in New Lynn and some areas in Northshore.

If more international students come over, they will have certain impact.

Would appreciate your comment on the future of Aucland property market 2005 and 2006.

Thanks

[casacamo]

My thoughts:

I think a gradual easing off of prices over the next 2 years,
until yeilds improve. (ie rental prices increase) at least in Auck.

We are already seeing a chronic lack of tradesman and manual workers,
sooner or later the govt. must come to it's senses and revert back to
the policy bringing in more skilled imigrants. which will increase
the demand for rental accomodation.

Everyone talks about increasing the amount public transportation,
But there is a major shortage of bus & train drivers.

Casacamo

[kimberley]

Thanks for your comments.

"I think a gradual easing off of prices over the next 2 years,
until yeilds improve. (ie rental prices increase) at least in Auck. " - this will be good which means easier to hold investment property.

However, in Sydney, rental return is somwhere 2%. Maybe the market will be going to keep the UP trend regardless of the rental return?

The other factor is the inflation. Most countires are facing an increase in inflation, same as NZ. Inflation traditionally helps the property market going, am i right?

[Gerrard]

Over to you Kieran...

Most of us would be just speculating or wishfully thinking. Kieran is one of the few people that understands and studies the market in order to make meaningful forecasts.

Gerrard

[CJ]

Over to you Kieran...

He charges for this service and from a recent post, is holed up in some office going over the figures now.

I predict a period of no grow but when immigation picks up, so will the market.

[RentMaster]

I have given up trying to predict.

The 'experts' have been saying the end of the boom is coming and prices are going to drop. But they have been saying that for about the last 12-18 months now. The BNZ economist is predicting a drop of 10% in the next 3 years.

Eventually the experts are going to be right and the prices are going to drop. By when is anyones guess.

[cube]

Brain drain accelerates :

http://www.nzherald.co.nz/index.cfm?c_id=3&ObjectID=10121661

Surprise as house prices hit record:

http://www.nzherald.co.nz/index.cfm?c_id=8&ObjectID=10121408

Who'd be a trend picker?

[kieran]

Thanks Gerrard and CJ,

Yes, I am holed up in an office pouring over data and information for our next set of hotspots reports but I welcome the break to comment here. Just to clarify for you CJ - I don't charge for everything and I regularly contribute a snapshot of my thoughts to PT and the media like NZHerald, Sunday Star Times, Metro Mag, NZPIMag, KPImag, Aust PI Mag, Listener, NBR etc,etc.

It's true though that I save the best (and most up to date) information for my monthly property cycle commentary which has a large paid subscriber base.

I have not been predicting any fall in house prices (even though most others have for the last 12mths or so) and it's not because I'm smarter than everyone else because I'm not. It just happens to be fact that I follow and monitor the true key drivers of our property market.

Admitedly I have had plenty of help from my history:

1) I have had the luxury of having operated in the finance industry for over 20years and this has helped to teach me which property market indicators impact on the property market, why and how. It also taught me which indicators are simply 'red herrings' (often the sensational ones that make great headlines...

2) The successes and failures of thousands of other property investors that have interacted with me and my mortgage broking business over the years.

3) My own successes and failures in property investing.

4) Soaking up every little piece of information relating to the property market that I can get my hands on. This includes communicating with those at the coalface of selling property.

I bold the comment relating to the property market as I used to think I had to know every little detail about property investment like learning the intricacies of the Res Tenancy Act, property maintenance, property management etc,etc,etc.

But now I stay away from the day to day operations of my property portfolio as much as I can because I truly understand that I ONLY make my money when I buy so I focus heavily on buying suitable types of property/ies in suitable locations. The 'suitability' factor is determined largely by the current status and progress of the property cycle.

A warning for those of you who believe all of the media headlines... DON'T
The article a few days ago which said Ak house prices hit record is misleading. It uses median house prices to make it's judgement (medians are unreliable). And they are talking about March and the market has already changed since then with a marked drop off in sales in specific parts of the market...

Ok my latest thoughts on the market are this:

I am starting to expect more of a sudden stop of Auckland house price rises (rather than a gradual decline) simply because the market is NOW starting to get too far out of line with the fundamentals. I still don't see a crash coming except in the specific market of inner city apartments

Our economy has already moved off it's peak performance and is now heading into troubled times...
We have oversupplied a market which is now experiencing a rapid reduction in demand...
Yields are ridiculously low, even in lower socio economic areas...
Interest rates are going to bite hard in the next 12 months and I don't expect them to drop later this year...
Depreciation rates will be adjusted down...

The only saving grace is the strong employment levels and rising wages although these rises are unsustainable (noticed the amount of strikes for more pay lately?).

Kimberley, Inflation is a red herring. I have evidence over the last 15 years that historically inflation has actually been influenced by increased house prices (not vice versa as commonly believed to be the case.)

So in summary I believe THE AUCKLAND MARKET WILL BE DECIDEDLY FLAT IN THE SHORT TERM AND TRENDING DOWN VERY SOON AND MORE RAPIDLY INTO 2006.

How much drop is anyones guess but my forecasts at present for the whole of Auckland indicate overall single digit growth this year ie under 5% with a single digit decrease next year up to 5%. Note there are plenty of areas which look set to have decreases this year too and some which will actually increase next year! But sorry I can't specify details of where as these are only available to our hotspots reports subscribers.

Back to study more data now!

[Josko]

Definitely some good reasons to stay out of the market, thanks Kieran. Or if serious get into some of those reports.

[casacamo]

Thanks for your comments Keiran, very enlighting as always.

I think we will be in a holding pattern for the next 2 years or so
as far as purchasing new properties.
We are intending to hold fast and make small improvements
to out IP's where we can to try & bump up the rents.

CC.

[kieran]

Thanks for the feedback.

It may sound odd but personally I am still in the market to buy on 2 fronts this year.

First my wife and I are planning to buy a family home this year. Whilst I usually don't apply my investing rules to my own residence in this case the timing appears good as we are looking in a specific area and in a specific market that is already suffering from low sales volumes and subsequently asking prices are being reduced...yay!

Second I am still seeking suitable Minor Dwellingable properties in West Auckland although they are becoming as rare as hens teeth at the right price. These are still producing slightly positive cashflow.

I am of the opinion it's always a good time to buy the 'right' buy but yes right now it's extremely difficult to find those 'right' buys...

[kimberley]

Thanks everyone for taking time getting back to me. Some really valuable comments you guys have made.

Remembered back in late 90s, Warren Buffet moved out from the dotcom boom about 2-3 years before the bust came. While Alan Greenspan warned the market for being overheating few years ahead of the bust. Maybe same thing will happen for the property market here but in a much smaller scale. Let's wait and see.

[David-Suzuki]

"I ONLY make my money when I buy"

I don't understand.

I make money in lots of ways after I buy. When I improve the property, add value, raise the rent. When I sell at a profit. When I solve problems. When I sell off the pieces of the pie. When I subdivide. When I re-value the property, pull out the deposit for the next property, further compounding the growth on my equity. Not just when I buy.

Entry strategy is important, but exit strategy is just as important.

[David-Suzuki]

There is a certain NZ town which is predicted to double in size in 2 years.
this information is not yet published, but is due to be published soon.

I predict this town will show up as a 'hotspot' eventually, when sales data starts to reflect what population data gives me a clue is going to happen.

I believe that population growth at this level will no doubt mean price rises to at least that level or beyond (prices doubling in two years.)

As for Auckland, what do you think investors and home-owners being put off and scared off buying right now is going to do to the rental market?
You guessed it. More renters...rents will rise. Also favourable for investors.

To a skilled investor, every part of the property cycle has profits in it.

[Monid]

Man what a tease

Not even the slightest clue for the rest of us? If it is a small enough town maybe the propertytalk community could buy it