So how did you spend your summer holidays? While most of us took advantage of the golden weather, more folk than usual decided to indulge in some real estate instead.
What does that mean for the market? Let’s take a closer look, shall we? (It’d be kind of anticlimactic to say no.)
Wishing you a Busy New Year
The January edition of the NZ Property Report provides us with the following factoids:
The seasonally adjusted asking price rose 4.2% to $440,507; this is up 5% on January 2012. For just the second time in history the asking price in Auckland exceeded $600,000 – 12.4% higher than same time last year.
8,849 new properties came onto the market in January, up 3.6% on the same time last year.
Inventory has stabilised at 29 weeks nationwide. This is still below the long-term average of 39 weeks, and Auckland and Canterbury continue to be affected by heaps of demand in relation to supply.
For more information and data for your region check out realestate.co.nz’s Unconditional blog.
That awkward Auckland moment…
Early in the New Year, a crafty Auckland housebuyer consulted his calendar, rubbed his hands together and thought “maybe I should get in on the property market while everyone else is out swimming and having barbeques.”
Alas, at his first open home he discovered a whole lot of other Aucklanders had exactly the same cunning plan – resulting in an extremely busy month for real estate and a lot of sossies going to waste.
Barfoot & Thompson, Auckland’s largest real estate firm, reported its biggest number of January listings (1440) in five years and the most January sales in six.
Those 820 properties sold generated an average price of $600,754 – down on December but the first time over $600,000 in any January.
So will this unusually busy start to the year continue on throughout the, uh, year? Our photographers have definitely been busier this summer, so February’s stats will be read with great interest.
LVR: Leave Vendors (un)Regulated
More evidence that talk of imposing Loan Value Ratio limits (LVR) would punish the wrong people:
Liam Dann, Business Editor of the New Zealand Herald, wrote a very compelling piece on the issue of LVRs and how they would hurt young people seeking to buy their first home. Said Dann,
“[Russel Norman] argues that the introduction of LVRs would bring house prices under control, and that would give the Reserve Bank room to cut rates further and that would bring the dollar down. This seems a huge leap of faith.
“Putting rules around the size of deposits required to buy a house won’t bother those who’ve already got cash or have plenty of equity tied up in other properties, although it will certainly make getting on the property ladder harder for those on lower incomes.
“The powers of supply and demand are strong and where there is serious population pressure they typically prove stronger than regulatory forces.”
Dann also points out that China, a country where the state can do pretty much whatever they want, has only achieved limited success with LVRs.
Sure, LVRs would require banks to be a bit tighter with their money, but the big issue with the housing market is a lack of supply, something all the major political parties are making plans to address.
Home buyers – first timers and otherwise – have a form of self-regulation that will stop most from borrowing more than they can afford. It’s a little something called common sense.
It makes perfect economic sense to borrow money while interest rates are low – as they are now – but when rates increase, as they inevitably will, the strategy then is to do one of two things:
- Save a bigger deposit and thus reduce the amount of interest paid, or
- Fix the mortgage rate before it floats above their heads.
With some economists predicting mortgage rates to eventually rise up to 8-9%, prices will flatten and demand will dampen. Such is the way of the world.
The Reserve Bank is investigating several ‘macroprudential tools’, LVRs among them, and they’ll report back in March. Here’s hoping fairness prevails.
Over to you
So what do you reckon: are LVRs the way to go after all? What would you do to bring Auckland back into line? Is Auckland out of line in the first place? Or should we all just throw in the towel and go swimming?
Let us know your thoughts below or on our Facebook page.