Conflicting reports this week on New Zealand’s property market. From the Australian:
A total of 5228 homes were sold last month, the most since February last year, according to a report from the Auckland-based Real Estate Institute of New Zealand. Sales rose from a record low 3706 in January.
Sounds quite an impressive rebound right? Interest rates are at an all-time low, might be the time to jump into property investment in New Zealand? Don’t get too excited, as with any report from the Real Estate Institute of New Zealand (the Real Estate Agent’s professional body) read between the lines and take a whole large heaped tablespoon of salt!
More on New Zealand Property Investment – Is the Market Looking Up?
The pundits at interest.co.nz are predicting that New Zealand’s houses will be officially affordable for median income earners by later in 2009.
The perfect storm has occurred in New Zealand – the official cash rate is at a historic low of 3.5% with many economists predicting that it will go lower again when its next reviewed on March 12. This has seen floating mortgage rate drop to 6.4% – rates not seen since the start of the housing boom in 2002.
The slower market particularly in top end property in Auckland is seeing some innovation in the New Zealand residential property scene.
There appears to be a few new trends appearing which have been absent from the local real estate scene for a while: vendor finance and swaps. So how do you sell a house in a quite market?
When buying an investment property in Australia or New Zealand the usual agreement is by “private treaty” when the buyer makes a written offer and the seller either accepts, rejects or counter-offers.
When a written offer is presented to an agent it is usual practice for any other interested parties to be contacted so that all offers can be presented to the seller together. Although the agent is obliged to present the offer as quickly as possible, the agent also has an obligation to inform the seller of any other potential offers. Normally what happens is that the agent “calls interest” giving all other agents in the agency a few hours to get any of their prospects to make a written offer. Beware that your initial offer may be your only chance and that a low-ball offer may be unofficially outbid. Now this does not necessarily you should make your best offer or an unconditional offer but think before you act.
New Zealand’s house prices and interest rates are at their highest rates for years. Property Investors Federation vice-president Andrew King says
“a 25-year mortgage for 90 per cent of the cost of the country’s median-priced house, worth $345,000 last month, would currently cost a new home-buyer $745 a week, including rates, maintenance, insurance and an allowance for other costs. By contrast, the national median rent last month was only $305 a week.”
The devil is in the detail though. King’s figures are based on a 25 year mortgage, almost all mortgages written in the last few years are 30 years. He’s also assumed only a 10% deposit. That is low, most banks will add the extra costs on anyone borrowing more than 80% of the property’s value. King also assumes a floating mortgage rate of 10.95% – no one in their right mind would float their entire mortgage, especially now that the 2-year fixed rate has dropped to 9.2%, at that’s just an indication that interest rates are on their way back down, finally.
New Zealand is a country with a population of only 4 million people – about the same size as Sydney – but with its own currency, fiscal policy and property market. One thing you can never accuse New Zealand property of is being dull.
Just released, Mercer’s 2008 Cost of Living Survey makes some interesting reading for those considering a move downunder, that is to Australia or New Zealand.
The Mercer’s survey looks at comparative costs for an expatriate moving to each of 150 world cities. The 2008 survey confirmed Moscow as the world’s most expensive city, the “winner” for three years in a row. Tokyo and London were second and third most expensive respectively The survey is still dominated by Asian and European cities in the top 10 spots but the Australia and Pacific region has been catching up – based, at least in part, on the weakening of the US dollar against most other major currencies.
Foreigners Buying Australian Property
Australia restricts what real estate non-residents can buy. Essentially it is lot easier to invest in commercial property than it is residential property: the Australian government sees an economic benefit for investment in commercial operations but is less clear on the benefits for Australia for non-residents investing in residential real-estate. The rules are complex and the details can be found Foreign Investment Review Board
More on Investing in Australia and New Zealand Real Estate: Rules for Non-Residents
There appears to be mounting evidence that New Zealand’s current interest rate cycle has hit its top: which will be a relief to those paying nearly 11% on their mortgages.
Higher fuel and food costs have also dented consumer spending while tighter international credit conditions have kept investors out of the market. The small New Zealand economy is always vulnerable to international credit crunches and the oil price is critical for a country who imports all its oil (petrol is now at NZ$2.25/litre).
More on New Zealand House Sales Drop: Will Interest Rates Follow?
