Wed, 04 Nov 2009 2:22p.m.
By Brian Dalley
Just what is going on in the real estate market? Is the recession over or not?
One minute the reports come out that there is a surge in house sales, prices are increasing, houses are selling much faster, then the amber light starts flashing on the message board;
Well to save the traffic building up I will give you my take on the matter which is in line with previous blogs.
What we are seeing now was expected. Good quality homes in the bottom end of markets [yes there are several markets throughout New Zealand] sold quickly as property prices and interest rates fell to affordable levels.
As the cost of land in many areas [note I said the cost of land not the cost of building] makes it near impossible to replenish stock levels, the markets started to slow when stock became scarce.
Until the people that have recently purchased decide to upgrade, it doesn’t matter what season it is as the market always moves faster at the beginning of the cycle then slows down. Seasonal fluctuations are to a large degree outdated anyway.
Added to this, the government decided to lease houses from the private investor rather than tie up millions in property development, which makes a lot of sense and with a 10 to 15 year rent guarantee the line of people waiting to invest is growing.
As all want a good return on investment that puts even more pressure on the bottom end of the market.
Just yesterday, I was in Hamilton talking with a property developer looking for affordable stock for the Mum and Dad investors that are forming a line outside my office.
Why Hamilton? It has potential for good natural growth, - one of the basic underlying fundamentals of property investing.
So where to from here for the first home buyer?
Frankly, unless someone takes heed of what I have been preaching for over a decade and reintroduces leasehold land or takes land out of the equation the market will resemble a person learning to drive a stick shift, bunny hopping along as the lower end of the market, the ‘driving force’ keeps running low on stock.
Which, I might add is starting to happen already.
We need steady sustainable growth and the only way that can be achieved is as mentioned above - Leasehold land or high decency housing; affordable housing.
Yes I am talking about apartments and terraced homes that the banks have in the past frowned upon.
Many Developers have learnt from their mistakes and so have lenders. Although, many lenders have still yet to put the past behind them when it comes to apartment lending, it is only a matter of time before they will be forced to rethink.
We are already seeing a shift away from budget apartments resembling shoe boxes to some very nice and affordable good-sized apartments in blocks that more reassemble luxury hotels.
Five years ago, I moved into an apartment and now I wouldn’t have it any other way. Sure they aren’t for everyone, but for many our way of thinking must change if owning a home is to become a reality for current and future generations.
Brian Dalley is a leading Property Consultant | former NZMBA Mortgage Broker, and Real Estate Agent.
You can read more of his views and opinions on his website www.propertyprofit.co.nz