A confused sea .
We have time is real estate when the winds of change are blowing in all directions. In sailing terms, this is a confused sea and we have one right now in Real Estate. For once I’m really not sure which way the market is going. If we look at the hard evidence then we are into a substantial slowdown. Open home attendance is way down to one or two people an open. Internet enquiry is down so much so that one or two enquiries a week is the norm when in the past it has been one or two a day. Listings are still coming in at an average rate but sales are down. Prices are stable with one or two bargains starting to appear. All evidence that the market has peaked and the brakes are on.
However, there are number of factors that may be working together to create an artificial and very temporary halt to the market. This combination may be having a temporary effect against what is a longer-term trend.
From a logical and historic viewpoint, we should see quite a bit more growth before we hit a peak. These include the overriding fact that there are not enough houses in the system to meet the current supply. The population is growing at a record level. The creation of new buildings and sections is way behind target and getting worse rather than better. Rents are going up and interest rates are predicted to stay low for a long time yet. Aucklanders want to get out of Auckland.
When we look at the factors in play to slow the market down we have the usual seasonal ones. The days are shorter so there are less daylight hours to look. Most people are still in winter hibernation mode and would sooner sit by a nice warm fire than go out and look at properties. Historically the market is slow over winter.
Then we have my friends at the Reserve Bank with their deposit ratio’s doing their bit to build a bigger and bigger homeless pool. The Asians appear to have left the pool and are not playing in our market anymore. The media have been scaring everyone with their “Market is About to Crash “headlines. But none of these fully explain the current lull. The only new factor in play is the three-yearly election. I just about refuse to believe it could be such a big factor as people still need houses. Under labour the market goes well as more people have the perception they have more money to spend and under National most of the same people think they have more money to spend. Unfortunately, no one will have more money to spend as the various promises get watered down or sink into inflation adjusted obscurity. What will happen is the Real Estate market will continue its ever present and increasing cycles as it has done for 130 years in New Zealand and nearly 1000 years in England. There is no good reason why the Real Estate market should pay such close attention to the election but every three year it does. Despite it having no logical reason and therefore flying in the face of reason it does. I am still in denial, but it is the only new factor in the market.
The Auckland market has stopped its slide and I would suggest is poised for its next run upwards. At some stage, although not yet , the Reserve bank will drop its deposit ratio requirements , thus unleashing the next artificially created boom cycle as the pent up dam of first home buyers suddenly do have enough deposit to buy and a new wave of buying hits the marketplace.
In Summary. The evidence is there that the Whangarei market has stalled for now. I predict that this is just a short-term effect and the market has an upside yet. We will see the proof of this in Mid October WHEN Winston’s NZ first party WHO is the king maker will make a decision. Last time he was in this position it took three months before we even knew who the government was as he horse traded with both parties to get his policies on the agenda. It was a painful process!
Corelogics latest figures
The August figures are in and Whangarei’s average price is $497,489. Just a fraction under $500,000 which should be reached in September and recorded in the October release. The increase from July is $3,277 which is $780 a week. The rate of rise is slowing down from 17.2% year on year to 15.7% year on year putting my earlier prediction of 12% by the end of the year about right.
There is no doubt now that we are heading for a rental crisis. There are not enough rental properties available to meet the current demand. This is clearly evident in Harcourts Just Rentals last monthly report (Courtesy of the lovely Renee Wilkinson)
Just Rentals is the largest Rental Agency in Whangarei and they currently have just 10 properties for rent. That may not seem so surprising but when you consider that they currently have zero vacancies the true story comes out. This translates as: – every one of their vast collection of houses is full. The only properties available are the ones that are becoming vacant over the next three weeks or are deliberately vacant for repairs and that is only 10. Two of which are available at over $500 per week.
These may not seem startling figures but as the ex Whangarei manager for Housing New Zealand I can tell you they are. We never had figures like this and we were just about giving the houses away. These figures are unheard of especially in winter when you usually have your highest vacancy rate. Tenants are choosing to stay put rather than join the hundreds currently on agency waiting lists. If Just rentals had another 100 properties they could fill them in weeks. Ring Renee and give her the challenge! (021892443)
Contrast this with a steady 900-1000 enquiries a month and you can see the picture unfolding
Another telling figure from HJR is the arrears amount which is running at just 1.4%. Looked at differently this means that 98.6 out of every 100 tenants is fully up to date with their rent. Again a starling figure in an industry that deals with deaths divorces and departures like no other.
The Rental crisis is here now and rents are going to go up. If Just rentals had another 100 properties they could fill them in weeks. Ring Renee and give her the challenge! (021892443)
Grandma would turn in her Grave
The security police have decided that Grandmas favourite cologne “Mothballs “are dangerous and have been banned in NZ. You know that strong smelling Camphor based white ball that grandma or great grandma put in her closet to kill moths. Invariably it tainted all her clothes so that as she walked down the street a steady stream of dead and dying moths were left in her wake along with a few overcome pedestrians, and a lot of kids saying “what was that funny smell mum?”
Well it turns out they are dangerous. To quote WebMD.
Mothballs are a pesticide product that contain either naphthalene or paradichlorobenzene as active ingredients. Both chemicals are toxic fumigants (which means they volatilize into the air) and must be present in high concentrations to be effective. This is the problem. Concentrations high enough to be effective for pest control can be dangerous for anyone exposed to them.
Mothballs can seriously impair indoor air quality. In fact, the odour of mothballs can be detected at a few parts per billion in the air. (One part per billion is about several drops of water in an Olympic-size swimming pool.)
What are the potential health impacts?
- Symptoms of exposure to naphthalene include headache, nausea, dizziness, and difficulty breathing. Exposure to large amounts of naphthalene may damage or destroy some of your red blood cells. This condition is called haemolytic anaemia. Some symptoms of haemolytic anaemia are fatigue, lack of appetite, restlessness, and pale skin. Exposure to large amounts of naphthalene may also cause nausea, vomiting, diarrhoea, blood in the urine, and a yellow colour to the skin. Based on the results from animal studies, the Department of Health and Humans Services (DHHS) concluded that naphthalene is reasonably anticipated to be a human carcinogen.
I don’t think the security police have finished with this one yet. I am waiting for my first contract where someone wants the house tested for ‘Mothball Contamination”. It’s coming!
Private Rentals versus State Rentals.
The 2006 Statistics which were revised in 2011 (Statistics NZ) show the following. Of all the rented properties in New Zealand;
- 81.8% (299,607) were privately owned
- 3% (11,004) are owned by local authorities
- 13.49% (49,419) are owned by The Government Agency Housing New Zealand
- 1.6% (6,165) are owned by state run enterprises such as education and hospital homes
We must keep in mind that HNZ say they have control of just over 62,000 homes so that probably means they also lease around 12,500 homes of private landlords.
The key point in these statistics is: – New Zealand would be in a lot of trouble if it didn’t have the private landlords. Near enough to 4/5 renters rent off a private landlord. These private landlords should be getting medals for community service rather being used as a political football every election and part blamed for the housing crisis. I see the argument that they are competing with the first home buyers and driving prices up but this carries no weight when you have the Reserve Bank putting 40% deposit requirements on first home buyers and driving them wholesale out of the market. To blame private landlords and then put up such financial barriers is complete nonsense.
We need to back the private landlords who are the real heroes in a housing crisis. I can see the argument for more state sector housing but this is a huge cost to the government of the day (more than all their election promises combined ) so has to be built up over time and history shows that large scale state houses tend to create large areas of “ State Licences Uninhabitable Mismanaged Societies” or as they are more widely known SLUMS.