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What's Happening in NZ's Property Market?

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Quiet January for Auckland's biggest realtor, as Barfoot data shows 5.7pc drop in house sales.

A quiet and blissfully warm January in Auckland saw sales by the city's biggest realtors decline but the agency's boss indicated that was not unexpected.

Barfoot & Thompson sold 745 residential properties in December but that fell last month to 593 sales, a point acknowledged by managing director Peter Thompson who heads the business which says it sells one in every three Auckland residential homes.

"Sales numbers at 593 were light for the month, down 13.8 percent on the average of the previous three months and down 5.7 percent on those for January last year. However, given January's short and holiday-interrupted trading period, caution needs to be attached to drawing strong conclusions from the month's sales," Thompson said.

Turnover in some price categories fell more than others.

"Sales of homes in the high-end categories of $2 million and $1 million - at 27 and 170 respectively - were consistent with the number of sales in these price categories in January last year. Sales of properties for under $500,000 fell from 13 per cent of all sales in January 2017 to 8 per cent of sales in January 2018," Thompson said.

The average January sale price for Barfoots was $934,753, 1.5 percent up on the previous three months. The median price was $830,000, 1.6 per cent below the average for the previous three months.

Thompson is optimistic.

"With prices having plateaued, stable mortgage interest rates and the potential that greater access to mortgage finance will be made available to first-time buyers and those on a limited income, sales numbers can be expected to grow as we head into the traditionally strong February to August sales period," he said.

"The same situation exists for rural and lifestyle property sales.

"With buyers being selective and taking their time, sales activity in this sector was quiet in January. There was a strong level of buyer interest and a solid level of quality new listings including a number of dairy farms.

"Interest in small to medium-sized commercial property was strong in January, and our sales for the month at $78 million were the highest on record for the month of January," he said.

Quotable Value will release national house value data on Friday.

By: Anne Gibson, Property editor, NZ Herald
Article: http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11988314

Home loan rates tipped to rise in 2018 - but not by much, say experts.

Home loan rates will likely rise a bit in 2018 but are not expected to take a big jump up, experts believe.

Reserve Bank data shows average fixed-rate mortgages rose by between 11 and 17 basis points between December 2016 and October 2017.

On a $350,000 mortgage fixed for two years over a 25-year term the increase was equivalent to an extra $22 a month.

But it was lower than had been expected.

Jose George, the general manager at Canstar New Zealand, said rates had moved up a bit in the past year but there hadn't been any big changes.

"We have seen the historical lows go. But rates have increased much lower than expected."

George said low inflation meant central banks had held rates low in a bid to stimulate spending and economic growth.

In New Zealand retail banks had also become much more selective about home loan lending over the past year in response to fears of a property market melt-down.

"There has been a lot of pressure on credit quality. Banks have become far more selective in terms of their risk appetite."

George said based on what had happened in the past 12 months it was hard to forecast where interest rates would go in 2018.

Economists are predicting the Reserve Bank won't make any moves to increase the official cash rate until late this year or even next year.

There is some suggestion the next rate change may also be down if inflation remains persistently low.

"It speaks to the uncertainty," he said.

But David Tripe, Massey University's banking expert, said looking at the yield curve suggested interest rates would be higher by the end of 2018.

"If we start to see bubbles of inflation from the new Government that might encourage a rate rise."

Increasing the minimum wage to $20 an hour by 2020 would push up wages at the lower end which was likely to increase inflation, Tripe said.

That could mean short-term rates start to rise as banks price in an increase in the official cash rate which affects floating and short term rates more than longer-term fixed rates.

"It is much more likely rates are going to rise over the next two years than fall."

But he doesn't think they will rise by much because household debt is so high.

That means any increases to rates will bite into people's spending capacity, limiting how much they can buy.

"People will be much more sensitive to interest rate rises than in the past."

Mark Collins, chief executive of Mike Pero Mortgages, said some people coming off very low rates from 2016 would see an increase.

But for others the change may be marginal.

"I think it will be lower for longer."

He urged people to shop around given there was around an 0.8 percentage point difference between the lowest and highest rates in the market.

On a $350,000 loan that could equate to about $200 extra a month. A lower rate could also allow a person to borrow more, he said.

Good advice was key.

"It's not just the rate but how it is structured."

Splitting a mortgage into several different parts could also help spread the risk of being faced with a big jump up all at once.

For those due to re-fix their home loan Collins said people needed to think about whether their circumstances had changed.

He urged people not to take the first offer made by their bank as it might not be the best in the market.

Collins said people should think about where they wanted to be financially in three to five years.

"The faster you pay it off the less interest you will pay."

Rising home loans
Home loan rates Dec 2016 - Oct 2017:
• floating 5.61% - 5.84% up 13 basis points
• one-year fixed 4.94% - 5.05% up 11 basis points
• two-year fixed 5.14% - 5.25% up 11 basis points
• three-year 5.4% 5.57% up 17 basis points
Source: Reserve Bank

Deposit rates
Savers who are looking for a better rate at the bank are likely to be disappointed.

Canstar's Jose George said there was unlikely to be any good news for savers, with term deposit rates expected to remain low.

"There isn't really much good news. In a low inflation environment what can you expect?"

He urged savers to be on the look out for specials which banks sometimes offered to help manage their books when a large amount of deposits matured at once.

The weighted average six-month term deposit rate rose just 2 basis points between December 2016 and November 2017 to 3.32 per cent, Reserve Bank figures show.

By: Tamsyn Parker, Money Editor, NZ Herald
Article: http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11952611

Top Bay of Plenty properties with businesses

Two high profile and freehold properties, along with the two established and successful Tyre Works Ltd businesses occupying them, in Rotorua and Mt Maunganui, have been put on the market.

"Both sites have road frontages to main arterial traffic routes with high traffic exposure and are zoned Industrial 1E," says Sharene Temple of Sothebys International Realty.

Temple is marketing 13 Fairy Springs Rd, Rotorua and 67 Hewletts Rd, Mt Maunganui, for sale by tender closing at 2pm on March 1 in Sotheby's office at 295 Parnell Rd, Auckland.

"The vendor owns the two Tyre Works businesses, which lease the properties he owns; and the Mt Maunganui property also has a second independent tenant," she says.

Temple says the two properties have been recently refurbished adding capacity for growth.

"The one in Rotorua is a concrete and steel new building with a floor area of about 1390sq m on a 2157sq m land site. In addition to the workshop area, there are two offices upstairs and a server room.

Tyre Works pays $147,056 per annum plus GST on a four-year lease commencing March 26, 2016, with two 4-year renewals. The first rent review is due on December 1, 2019, and two yearly thereafter.

"Three combined lots make for a rectangular shaped site, with a frontage of around 53.6 metres to main arterial Fairy Springs Rd, and also to a KFC restaurant through to the left of the property, giving great exposure to passing traffic."

The Mt Maunganui property has a total floor area of around 2159.4 sq m encompassing two buildings on a 4360sq m flat site with Tyre Works leasing space in both buildings. The front part of the roadside building is tenanted by Evolution Cycles.

Space within the front building at 67A Hewletts Rd is leased by Tyre Works for $67,110 per annum plus GST commencing December 1, 2014, on a four-year term with two 4-yearly rights of renewal and now two-yearly rent reviews.

The space leased by Tyre Works in the back building at 1/67 Hewletts Rd has a four-year lease to Tyre Works commencing December 1, 2014, with two 4-year renewals taking a final expiry through to December 1, 2022. Rent reviews are now two yearly and the annual rent is $35,000 plus GST.

Evolution Cycles, the other tenant occupying Units 1 and 2 at 67 Hewletts Rd, is on a four-year net lease commencing July 1, 2015, and pays $86,841.67 per annum plus GST. Rent reviews are also two yearly.

The front of the roadside building comprises showroom space, open plan office, workshop, two toilets, and a mezzanine room; along with a deck leased to Evolution Cycles.

At the back of this building is a workshop with a 4-6m height, toilet and a mezzanine landing with an office area.

The rear building encompasses a warehouse with a 6-8m height to ceiling; reception, staff room, client room and mezzanine space.

Temple says the property, with a 37.61m frontage to Hewlett Rd, is highly visible to traffic travelling between Mt Maunganui and the Tauranga Harbour Bridge.

"The Maunganui area is the closest industrial area to the Port of Tauranga and Hewletts Rd is a major arterial route with heavy traffic usage."

She says the property has an excellent central location within the Mount Maunganui industrial area and good access to air, sea and rail services.

"This sale presents a rare opportunity to purchase two Bay of Plenty commercial properties on major roads with established businesses as tenants.

"The vendor is retiring and would prefer to sell the portfolio of land, buildings and the two Tyre Works businesses to just one buyer."

By: Sharene Temple, Sothebys International Realty.
Article: http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11989249

Tenants face perfect storm in rental market

A perfect storm has hit renters, with the number of rental properties on the market halving since last year while prices have hit a record high, Trade Me says.

The number of available rentals in November was down 49 percent on last year, while the national median rent rose 3.4 percent to a record-breaking $460 per week.

All but one of New Zealand's 15 regions saw rent increases year-on-year, with six regions experiencing double-digit growth.

Wellington was hardest-hit with 71 percent fewer rentals, while the median weekly rent rose 8.7 percent to $470.

"Supply simply cannot keep up with the demand we are seeing and it's rare for rental properties to be coming on and off the market so quickly," Trade Me's head of property Nigel Jeffries said.

"The coming months are not looking good for flat-hunting Kiwis.

"Fierce demand means landlords can have their houses listed and then tenanted in record time."

In Auckland, median rents jumped 1.9 percent to $530 per week while supply dropped 35 percent. And it could get worse.

"As we head into the New Year and university students prepare to flood the Auckland rental market, some large rental increases could be in store for the Super City," Mr Jeffries said.

The biggest jump in rental prices came in Marlborough, which was up 23.5 percent from $340 per week last year to $420 per week in November.

However Christchurch managed to buck the national trend as the supply grew during the earthquake rebuild, with rents falling slightly to $390 per week.

By: NZN / Newshub.
Article: http://www.newshub.co.nz/home/money/2017/12/tenants-face-perfect-storm-in-rental-market.html