Invest In Property

In 2 articles today I read that property values across the land were returning to the same levels they were at during 2008 which sounds like pretty good news.
The information also noted that values in Tauranga are down 10.6% since the market peak which is great news (early estimates were indicating that prices would drop by 20% or more) but also news which may represent a double edged sword. It is news like this that has most economists picking that the Reserve Bank governor Alan Bollard will have to “renege” on his commitment to homeowners. Mr Bollard promised that the official interest rate will not be increased till the latter part of next year. With the housing market performing better than expected this is unlikely.
I find it interesting though because the rises are coming off very low rates which everybody seems to forget, after all let’s say the market average dropped from $600,000 to $300,000 (extreme example are being used to illustrate my point) and then came up strongly at a 20% rise we would still only have an average of $360,000 which is well down on the peak of $600,000. This point seems to be ignored by most commentators.
Also in the lower end of the market there has been a lot of activity with some great results over the last 6 months due to the lower interest rates and pressure from people down grading from the expensive homes they can now no longer afford but what about the high end of the Tauranga market?
Supposedly property values in Tauranga declined by 4.1% over the past year (calculated over the three months ending August 2009 in comparison to the same period last year), The average sale price for the region decreased from to $415,156 to $412,320 and since I believe a high proportion of those property sales will in fact be properties in the lower end of the price spectrum it is possible that the higher priced properties are still suffering. I would love to see what the mean price was.
Mr. Shayne Donovan-Grammer of QV Valuations supports this view when he commented in the article; “Residential property values in Tauranga have been relatively stable over the past five months. The bulk of activity is still occurring in the under $350,000 bracket which is having the affect of subduing the average sale price. The environment of low interest rates, sharp pricing and realistic vendors is making housing relatively affordable and is driving activity”. Which is great for that end but what is happening in the over $700,000 bracket?
“Some price brackets are desperately short of supply which has created the lift in values we have witnessed over recent months. For example, some properties previously selling in and around the $280,000 range are now selling for $300,000 or slightly above” said Donovan-Grammer which again is good news for those investors who bought when the prices dropped whilst interest rates were high and monetary policy was tight however what will things look like if Mr. Bollard reneges on his promise and starts to hike interest rates? One economist I read has picked that the official cash rate will be at 6.25% by the end of 2011 which would put the variable rate back around the 8.5% mark.
All the best till next time

National house values chalked up their fourth successive month of increases in August, to be just 2.8 per cent lower than a year ago, according to Quotable Value figures.

Property values in the Wellington region were down 1.4 per cent on last year, a big improvement on the 4 per cent annual fall in July.

The average sale price for the region rose slightly from $429,571 to $431,614. But despite the increases, values in Wellington were still 7.3 per cent off their peak in 2007.

Pieter Geill of QV Valuations said a continuing shortage of listings had sparked renewed interest in property. “It is very hard to say if values will continue their upward trend in Wellington. An influx of listings in spring could very well see the market rebalance away from a seller’s advantage.”

Job losses in the public sector could also have an impact, he said.

Nationally, the August values were a sharp improvement on the same period in July, when prices were 5 per cent lower. The national average sale price also rose, to $385,426 in August from $382,758 in July.

Nationwide, values recovered to 1.9 per cent more than they were in April, but were still 7.9 per cent below their peak.

QV valuation manager Glenda Whitehead said confidence appeared to be returning to the market, with solid sales activity in August. But she cautioned that the pickup had been expected as more properties came on to the market.

Houses in all the main centres have increased in value in the past three months. Auckland and Christchurch were both 1.9 per cent below the same time last year.

Most of the provincial centres have also shown less annual decline than was reported last month.