The merged banks ANZ/National Bank have announced that first home buyers will need 20% deposits. From yesterday the previous minimum deposit requirement of 10% has been doubled.

Saving - the Old Fashioned Way

This means that buyers in Auckland, New Zealand’s most expensive city, where the median price is $433,000 will need a $86,600 deposit. In Wellington they will need $74,000 for a median-priced property.

Professor Bob Hargreaves, who heads Massey University’s real estate analysis unit, said rationing credit was a natural reaction to the global financial turmoil.

“People are re-pricing risk. Banks are finding it harder to obtain the overseas money that we rely on because it’s more expensive.

“I would say it’s one way of throttling demand. Banks are saying, ‘OK we’re still in the business of lending to people but you have to put more in yourself.’ In good times they’re your best friend; in not-so-good times they can be quite tough.”

So yes banks are fair weather friends but seriously would you really want to be borrowing 90% of a home’s price when there is as yet no evidence that the New Zealand property market has reached the bottom? Obviously the bank thinks its a bad idea to lend you 90% so I would tend to avoid being over-leveraged myself at the moment.

Housing affordability is still dire according to Massey University’s quarterly survey:

While his unit’s last home affordability survey in September had shown “slight” improvements over the past three quarters for home-buyers, things were still grim.

On an annual basis, national affordability improved 4.1 per cent because of average weekly wages increasing, as well as mortgage rates and house prices trending down.

The real problem we be of course is that New Zealanders are terrible at saving and most of those renting consider saving a deposit the biggest barrier to getting into the housing market. The reality though, is that at the moment deciding to buy a home is a little bit more difficult than worrying about the location or the decor: saving is suddenly going to be trendy again!

The good news for landlords appears to be that there will be no sudden shortage of tenants and that should support rental prices, so eventually the rental yields will improve if prices continue to drop, and then the cycle will start again.
Photo Credit

As a property investor I always like to keep an eye on what the urban planners are up to. Love or loath them they do affect the value of my properties so in my opinion its worth keeping an eye on new developments (bad pun intended).

Typical Sydney Terraced Housing

At a recent conference of the Urban Development Institute of Australia, WA branch Deon White had some interesting comments in his opening address :

As we look at the 10 to 15-year trends in population growth - economic activity and affordability, technology, health, energy costs and climate change - the shape of our cities is inevitably going to evolve at a rate perhaps not seen since the mass production of cars after World War II. Physically we think it is inevitable that cities will become more compact and green

The word of the day is “Liveablitiy” which simply means that people look at the neighbourhood and city as well as the actual house when making their housing purchase! So it you were going to buy a property for investment in Australia what are the key things to look for? Well I’ll tell you what I would look for:

• sustained population growth based on either lifestyle reasons, or better, fundamental job creation: top spots: Adelaide, Brisbane, Perth;
• suburbs which have good public transport infrastructure: preferably a rail line or a planned rail corridor. This is key for properties designed for middle /low income renters because of the cost of commuting can make some otherwise desirable outer-suburbs too expensive;
• suburbs with a heart: a village, a beach, a green space, at least some shops! People like to live in a community and a community tends to have fewer social problems then a suburb which consists solely of miles and miles of standalone homes and streets people only ever drive done.
• well-insulated houses with solar heating are not only “green” they are economic for the tenants. Most of Australia (outside of the south-east) you need to run air-con for months over summer, a well insulated house with shade on the NW side makes this a great deal cheaper.
• climate change: is huge in some agriculture areas. Well it probably isn’t climate change more water mismanagement but the bottom line is that the vast majority of the Murray-Darling basin, which extends from Queensland to Victoria, is probably never going to support the agriculture it used to. This in turn is going to kill some communities: probably best not to buy there - though there will be some bargains for sure.

Knowing a city well enough to understand a suburb’s advantages/disadvantages is really essential before you start thinking about buying property there.

Photo credit: Broken Piggy

Some time ago, we suggested that Dubai’s property bubble was about to burst. A recent Dow Jones report suggest that time has come. A six-year real estate boom in Dubai that spurred a $475 billion building frenzy has ended, according to agents who say sales are collapsing amid fears that the global economic downturn will hit the sheikdom.

“Last month was a real disaster and worse is coming I guess,” Mehdi Zoghbi, an agent at Middle East Real Estate Consultants, told Zawya Dow Jones Sunday.

Zoghbi says that desperate sellers are now offering off-plan properties on the secondary market for a zero premium, effectively accepting a loss on their investment in order to offload quickly.

Dubai, the first Gulf sheikdom to allow foreigners rights to buy homes, may also be the first to see a crash in property prices as uncertainty over the region’s prospects and the global credit crunch have undermined investors’ confidence.

“Our commissions have fallen by up to 70% recently,” said Khaled Daji, an agent at Al Jabal Real Estate. “The most hit are the projects under development and those luxurious high end. We plan to survive for another six months to see how this crisis unfolds.”

Daji says that Dubai’s real estate watchdog needs to do more to stop the practice of “flipping” property and the payment of “key money” to reserve real estate.

But the city’s biggest developers like Emaar Properties and Nakheel are adamant that sales remain robust. Mohammed Alabbar, Emaar’s chairman and one of the architects of Dubai’s real estate boom, said in the company’s third-quarter statement that “we are very confident of our company’s fundamentals and future growth.”

That hasn’t stopped investors dropping the company’s shares. Emaar’s stock has fallen 62% since the beginning of the year, that’s more than the 48% fall in the Dubai Financial Market’s main index over the same period, according to Zawya.com data.

Earlier this month, Colliers International said the growth of property prices in Dubai slowed to 16% in the second quarter of 2008 from 42% in the first quarter. Morgan Stanley warned in August that property hotspot Dubai could see a 10% fall in prices by 2010.

A collapse in real estate prices will add to pressure on Dubai’s economy, which doesn’t benefit from the vast oil income enjoyed by neighboring Abu Dhabi. Property and construction are estimated to account for about 30% of the emirate’s economy.

And the buoyant economic conditions across the region that have underpinned Dubai’s real estate boom, which according to Middle East Economic Digest will consume $475 billion in capital spending, are now under assault.

Oil, which underpins the region’s economy, looks likely to fall further as demand across the globe weakens. Crude traded in New York closed down at $64.15 a barrel Friday.

Not Panicking

Tighter lending is also making life hard for many real estate agents, with buyers unable to secure loans for property without larger deposits.

HSBC Holdings, the largest international bank offering home loans for Dubai property, tightened its requirements last month asking borrowers to front up to 50% of the purchasing price for some homes. The bank will now only lend up to 70% of the total value of the property in the best cases, down from 85% last month.

The tougher terms are “to ensure that customers receive loans that they can afford to repay at a time of considerable uncertainty around the world,” the bank said in a statement to Zawya Dow Jones.

“The financial crisis is putting people off buying,” said Lisa Penderis Dubai-based real-estate agent. “End users are particularly impacted because banks are only lending up to 75% so people need to find a lot of cash for a deposit.”

Tony Stafford, a British commercial manager working in Dubai has like many of the 100,000 U.K. nationals living in the United Arab Emirates bought property in the sheikdom as an investment. He owns two apartments worth about 3 million U.A.E. dirhams ($817,000).

“It’s not a great time to be selling as banks aren’t lending,” Stafford told Zawya Dow Jones in a phone interview. “But I’m not going to reduce the price of the apartments because I’m confident things will pick up again before Christmas. I’m not panicking. I’m just waiting for the right buyer.”

Stafford, who remains bullish, says he will buy another property in Dubai and is now in a stronger position to negotiate on the price. His optimism is shared by Dubai’s ruler Sheikh Mohammed bin Rashid Al Maktoum who announced earlier this month plans for the AED350 billion redevelopment of the city’s Satwa district.

But whether buyers still exist in the current depressed economic mood is no longer guaranteed.

Source

Port Hedland isn’t the sort of spot you’d choose for your next holiday. Its remote, hot for 1/2 the year, cold for the rest and dusty. Oh and its just one large industrial port for the iron ore from the Pilbara.

It probably won’t look anything like this one though:

Sanctuary Cove Queensland

But a $100 million resort-style village is being planned for Port Hedland - in an attempt to solve the accommodation shortage in Hedland and add beds for 1200 workers. Catering and facilities management group Compass is keen to begin construction before Christmas on an accommodation complex to be build on 12ha which is adjacent to the Port Hedland airport. To super-village will not only include individual single rooms with en-suite but also a swimming pool, gym, tennis courts, cinema, lawn bowls and an indoor cricket pitch.

The main employers in town include the mining giants of BHP-Biliton and Fortescue Metals Group. The companies have advised the local council tha an extra 3000 workers will be needed in town by the middle of next year - and at the moment there are no vacancies in town :and that includes the campgrounds. Poor quality of accommodation does not cut it for workers who are doing 12 hour shifts in a climate where shade temperatures over 50C are not uncommon for months over summer. Its even more difficult for the raft of smaller companies who provide services to the big employers such as catering and maintenance, who also have to accommodate their workers who may not be be on the 6-figure salaries paid by the big miners.

For anyone who is tempted to head north on the chance of a well-paid job: there is every chance of the job: just make sure you have your accommodation sorted out. Rents of over $1000/week for ordinary houses in Hedland are not uncommon