colinrealestate

Home ownership, once an integral part of the Kiwi dream, is one of the hottest topics right now. Limited property listings, relatively low interest rates and a burgeoning population are among the factors driving the bullish market and record high prices, particularly in Auckland.
Marry this with what’s been one of the this country’s most vigorous election campaigns with promises of home loan subsidies for first-time buyers, talk of capital gains tax and progressive home ownership programs.
One thing we’re not talking about enough is the millions spent in unnecessary home-loan interest every-day. There’s often a perception that once you get a home loan, you just let it tick over. Repayments become your biggest bill,and a call to your bank happens only if something goes wrong.
Home owners need to regularly reassess how they structure their mortgage. Does it work for their present situation? Could they increase prepayments?
Every four hours, New Zealanders pay $6M in home-loan interest. Many of us recognise the importance of long-term financial goals, but far fewer are taking critical steps to manage this.
When you look at the modeling, doing simple things like increasing your loan repayments in line with inflation every year can shred up to $156,000 of interest off a $300,000 home loan compared with a typical 30-year table loan, and it’ll be paid off 11 years quicker.
Even changing from monthly to fortnightly repayments will have a big impact on the interest you pay. One of the best pieces of advice I got early on was to pay off more than my minimum repayments when possible. This advice helped me be better with money and to curb tendencies to spend.
Home loans don’t have to be complicated. We need to be having conversations about structuring home loans so customers avoid unnecessary home-loan interest. What’s most important is that as a Nation we’re talking about it. Source: The NZ Herald – Anthony Healy, BNZ Chief Executive

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The election has been and gone, we know the result, and it is business as usual with a pro-business Government rather than a ragtag of tax raising parties.
Does this matter for the housing market?
No capital gains tax is a positive, and the outright majority to National increases the chances of more red tape being removed from the Resource Management Act. Mainly however, the simple passage of a period of high uncertainty means we will soon get a clearer picture of the true state of the real estate market.
The NZ Property Report data shows that Auckland average sales prices were 12.3% ahead of a year earlier and have risen 2% in the past three months so gains continue apace even with election uncertainty. That supports our view of a market still rising under the influence of property shortages. The media make it clear that property listings remain in short supply and we would theorise that one reason for this is high awareness of the on-going property shortage in our two biggest cities making people unwilling to sell – and keen to buy more
But what about the rest of the country?
There we have a positive and negative to factor in. Dairy prices continue to fall and with a rising chance that the dairy pay-out this year might conceivably be below $5.00 the dairy-dependent parts of the country are going to suffer more than we were thinking just two weeks ago. The positive however, is that reduced prospects for Regional growth mean that the Reserve Bank might not make their next interest rate increase until well into 2015. Thus there will be less interest rate restraint on the market than we were thinking.
If you are quick off the mark you may have made an interesting logical leap here. Less high interest rates benefits all markets. The diary decline however, mainly hits the Regions. Overall, Christchurch and Auckland receive a net benefit! Of course the entire picture would change dramatically if either Ebola hits Western Countries, or the democracy protests in Hong Kong produce a bloody crackdown which would shatter Asian confidence and export demand for our products.
High uncertainty continues internationally. But barring either these two shock scenarios the still accelerating migration boom for New Zealand, lowish interest rates by the standards of all but our youngest buyers, property shortages, and good jobs growth means in many but certainly not all parts of New Zealand, the housing market will remain firm.
As a final note, its pays to note that in Australia rules on housing finance and perhaps purchasing by foreigners are on the cusp of being tightened. This could lead to the diversion of some buyers to our market over the coming year. Worth keeping an eye on given that one factor driving higher Chinese buying of New Zealand and Australian property (anecdotally speaking as there are no numbers) was the imposition of high stamp duties for foreigner buying some time ago in Singapore and Hong Kong.

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A SPRING BOUNCE in the property market may have been delayed this year but it hasn’t been eliminated entirely.
That’s the message from commentators who say, despite a marked reduction in turnover in August, better times are likely just around the corner.
Real Estate Institute statistics (REINZ) showed 5481 homes were sold in August, down 16.3% from the same month in 2013 and down 7% from July.
Loan-to-value restrictions were still being cited as a significant factor affecting the market but a lack of property listings was also an issue in most parts of the country as low stock levels restricted buyer choice.
REINZ Chief Executive, Helen O’Sullivan said prices are relatively steady, with the median price rising by 1% from July, and the year-on-year price increase now at 7.7%. Auckland and Canterbury remain the dominant contributors to the increase in the national median price, with Regions outside of these two areas representing just 14% of the increase.
Price wise, the residential housing market remains “a tale of two cities and the rest of the country” although the volume decline is now apparent in all areas.
Property listings website Realestate.co.nz said new property listings numbered 9482 in August, 11.5% down on the same time last year. The fall affected most Regions around the country, with only Northland, the Coromandel and Central North Island bucking the trend.
Marketing Manager, Paul McKenzie said that every August “strong lifts” were evident in new property listings after the quieter winter months. “The expected lift did come this year, but it’s not nearly as dramatic as in the past, due to the election.
While the number of property sales was down 16.3% compared with August 2013, REINZ said the number of sales below $400,000 fell by 24.8%. This follows a fall in sales below $400,000 of 21.8% between July 2013 and July 2014. This may be indicative of fewer sales in the lower price brackets since the imposition of the loan-to-value restrictions.
REINZ’s national median price increased $30,000 on the year before, to $420,000. Of that increase, 70% was in Auckland.
Source: Susan Edmunds – NZ Property Investor – October 2014

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The Real Estate Institute of New Zealand
(REINZ) statistics show that the 5893 homes
sold in July was up 2.3% on June this year but
down 13% on July last year. The National
median price was $416,000 for the month,
down $11,250, or 2.6% on June but up
$31,000 on July 2013.
Chief Executive Officer, Helen OʼSullivan said
the market was “firmly in winter mode”, with low
listings and muted activity. “Sales volumes
picked up a little in July compared to last month
but this is about in line with the normal seasonal
pattern”.
Loan-to-value ratio (LVR) restrictions were
having a big impact on Regional New Zealand
in particular, she said. “The reported lack of able
buyers is filtering up the price points and onto
vendor behaviour. In this context it is worth
noting that the Auckland and
Canterbury/Westland accounted for more than
100% of the increase in the National median
price between July this year and July last year,
a further indication that the National price” is
being driven by these two Regions alone”.
Construction in Auckland and Christchurch is
desperately needed to ease demand and ease
rising prices. The market elsewhere can only be
helped by a removal of the LVR restrictions,
allowing first-home buyers the freedom to step
onto the property ladder.
Westpac Chief Economist Dominick Stephens
said he expected a brief resurgence in the
market before a more pervasive downturn
happened. He said house prices were on track
to rise about 5% this year, compared to 10%
Westpac Chief Economist Dominick Stephens
said he expected a brief resurgence in the
market before a more pervasive downturn
happened. He said house prices were on track
to rise about 5% this year, compared to 10%
last year.
More price rises were likely because migration
was expected to hit an all-time high of 50,000
people in a year, he said. “Our research
indicates that net migration usually plays only a
relatively small role in determining house prices.
But sheer weight of numbers means that even
that small role will translate into a reasonable
boost to house prices over the year ahead”.
But he said that would not last. By the second
half of the decade, Stephens predicted a
recovering Australian economy would attract
New Zealanderʼs back across the ditch.

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* REINZ House Sales – Down:
There were 5763 sales in
June,down 6.3% on June 2013 and
more than 12% down on May. .
* Interest Rates – Up: Fixed
mortgage rates have risen sharply
over the past few weeks..
* OCR – Down: The OCR is set to
increase over coming years.
* Immigration – Up: Immigration is
running at a 10 yr high, as fewer
Kiwis leave and return from Australia.
* Building Consents – Neutral:
Building consent numbers are
growing but still have a way to go to
make up for years of shortfall.
*Mortgage Approvals: Down: The
number of mortgage approvals is
down 17.5% compared to the same
13 weeks of last year.
* Rents – Up: Landlords are
advised to keep up with rising
interest rates, 3brm homes rents are
up an average of $21wk, compared
to last year.

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It is a question that I have often heard asked, as well as
being a regular explanation made when laying the blame for a
period of quieter sales leading up to the general election.
Using REINZ property sales statistics covering a total of 7
general elections held over the past 22 years, I found on
average, general elections depress property sales as 5 of the
8 elections caused property sales to decline as compared to
normal. However there is no real consistency.
Without a convincing answer, I reflected on the impact
economic sentiment has on the property market at the time of
each election. I plotted these variances to the norm for the 3
months run up to each election against the GDP trend from
Reserve Bank data.
Now in my view this correlation makes sense and aligns the
election to the cycle of GDP as follows:
1993 – GDP on a surge, economic optimism = 14% rise in
relative sales
1996 – GDP declining, economic pessimism, compounded by
first MMP election = 19% decline in relative sales
1999 – GDP starting recovery from Asian crisis, economic
caution = 7% decline in relative sales
2002 – GDP cautious recovery from post 2001 falls, economic
caution = 2% decline in relative sales
2005 – GDP declining, economic caution = 1% decline in
relative sales
2008 – GDP collapsing, economic pessimism = 5% decline in
relative sales
2011 – GDP recovery, growing economic confidence = 3%
rise in relative sales
It would be safe to say that not surprisingly the impact of an
election on the property market is more a reflection of the
economic confidence at the time than any across- the-board
view that elections dampen property markets.
As to September 2014 well with one month’s data in the
system, I am sorry to say for all those looking to blame the
election for a dampening of sales results – doesn’t look like it.

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Wholesale interest rates have not changed much in the past week but competition between banks for home lending appears to have strengthened.
By all means take into account the cash bonuses which lenders may offer if you sign up. But stay focused mainly on the interest rates being offered.
I personally would remain willing to hop out of a floating rate and move most of my debt to a three year term. Maybe I would also fix some for two years given the strong competition currently in that term.

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One of the benefits of KiwiSaver is anyone saving to buy their first home can dip into their KiwiSaver funds to boost their deposit.
If you’ve been in KiwiSaver for several years, as you have, there might be a tidy little sum to help you get into your own home more quickly, even after a wee break from making contributions.
Fiona Oliver, general manager, wealth management at AMP, talks through the rules around using KiwiSaver to buy a first home.
“In order to qualify for the ‘withdrawal for purpose of purchase of first home’ as outlined under the KiwiSaver Act you can make a withdrawal if three or more years have passed since the IRD received your first contribution to a KiwiSaver scheme,” Oliver says.
“Given you’ve been saving for more than five years; you would be able to withdraw all of your member contributions and employer contributions and any investment earnings on those amounts.
“So long as the three years have passed (as described above) it does not matter that you’re on a contributions holiday at the moment. However, it’s worth being aware that you are unable to withdraw the $1000 government kick-start or any member tax credits,” Oliver says.
“Good luck with the rest of your study and the purchase of your first home.”
The funds will be deposited into your lawyer’s trust account by your KiwiSaver provider at settlement time, so you won’t be paid out a lump sum and the funds can’t be paid in retrospect if the sale has already gone through.
To release your funds for a first home purchase your provider will want:
*A copy of the sale and purchase agreement that shows you are the purchaser.
*An undertaking from your lawyer that the sale and purchase agreement is unconditional.
*An undertaking from your lawyer that the withdrawn KiwiSaver funds will be paid to the seller as part of the purchase price or repaid to your KiwiSaver provider if the sale does not got through.
It would also be wise to see if you are eligible for the KiwiSaver first-home deposit subsidy, administered by Housing New Zealand.
Once you’ve contributed towards KiwiSaver for three years at the minimum percentage of your total income, you could be eligible for the deposit subsidy, which will pay out $1000 for each year you’ve been a member, up to a maximum of $5000.
This subsidy is aimed at people on a modest income – either less than $80,000 for an individual in the past 12 months or $120,000 for two or more buyers in the past 12 months – and there are price caps on the house you plan to buy.
Auckland has the highest price cap at $485,000, but it varies across the country depending on the average cost of an entry-level house.
To get the deposit subsidy you need to have 10 per cent of the deposit yourself – this is where some of those KiwiSaver funds could help get you over this line.
Housing New Zealand says you need to submit your application at least four weeks before your settlement date, but if you have not yet found a home to buy and want to know if you are eligible or not, you can get a pre-approval that is valid for 180 days.
Housing New Zealand won’t pay out after the house sale has gone through so, like the KiwiSaver withdrawal, a bit of pre-planning will help the process to run smoothly.
You can find out more information, download the application form and find out how to obtain the relevant supporting documents at www.hnzc.co.nz/kiwisaver.

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Statistics New Zealand state that the median weekly total income for households in 2013 was $1,358 (based upon 1.458 million households).
As such we can determine that mortgage repayments need to be below $407.40 per week in order to be classified as affordable.
So what does $407.40 per week get you? Westpac’s calculator suggests that with today’s rate you could buy a house worth $350,000.
Realestate.co.nz has in excess of 12,000 properties with at least one bedroom under $300,000 currently available in New Zealand. Increase the threshold to $400,000 and there are 18,795.
There are 1,312 properties with at least one bedroom under $400,000 available in Auckland; 578 in Christchurch; 1,129 in Wellington; 582 in Wellington.
I freely admit there are not that many when you look across the country, however there are properties there and available which are deemed to be affordable.
The above properties are not likely to be in the highly sought after locations, they may require a longer drive to work, perhaps they aren’t brand new with double glazing and modern insulation. They may only have two bedrooms.
However, getting on the property ladder will enable people to build equity in their house, later sell that house, purchase one the next rung up.
It’s called the property ladder because more often than not you start at the bottom and climb, one rung at a time up.

Source Thomas Davies Stuff.co.nz

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* REINZ House Sales – Down: Sales in February were down 20.2%on the same time a year ago.
* Interest Rates –Down: Interest rates are increasing especially for longer fixed terms.
* OCR – Down: It’s been suggested the Reserve Bank may slow the rate of those increases because of the effectiveness of the LVR restriction and the strength of the Kiwi dollar.
* Immigration – Up: Migration is reducing as fewer Kiwis leave for Australia and more immigrants move to NZ..
* Building Consents – Neutral: Building activity continues to increase but still not at 2013 levels and has a lot of lost ground to make up.
*Mortgage Approvals: Down: Seasonally adjusted approvals and banks new commitments dropped 22 & 17 points respectively between 9/13 & 3/14
* Rents – Up: Rents are rising as investors pass on higher interest costs to their tenants.

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