I have been reading a few things lately about the Real Estate prices in and around Christchurch and New Zealand. There seems to be much talk about the market prices climbing up and up and up in recent months and reaching what one is calling record prices. What the hell is going on. The country is still suffering one of the longest recessions in recent times and Real Estate companies across the board are spouting out that the housing market is in full recovery.
Here is what I read on stuff.co.nz http://www.stuff.co.nz/the-press/news/christchurch/3239911/House-prices-break-record
Christchurch house prices have hit an all-time high as a shortage of properties fuels a market recovery. The city’s median house price last month was $347,250, up 12 per cent on a year earlier and beating the previous record of $340,000 set in November 2007, Real Estate Institute figures show. There were 506 Christchurch house sales last month – about the same number as in December 2008. Bank of New Zealand chief economist Tony Alexander said prices were rising as the low level of new-home building curbed supply, while a rise in immigration and lower interest rates boosted demand. The market was playing “catch-up” after the recession kept buyers away, he said. Cities were leading the market recovery, with export concerns and farm debt hurting rural areas. “I’d expect that prices on average in many parts of the country will continue to rise by 5 or 10 per cent over the next year,” Alexander said. Longer-term interest rates were rising, but he expected floating and shorter-term rates to stay low until next year, prolonging the market rally. Real Estate Institute president Peter McDonald said house prices had “definitely stabilised” and were now rising, boosting optimism in the industry. New homeowner Tania Power said competition from other buyers meant she and partner Marc Greenhill made their top offer to secure the Christchurch home they moved into last week. The couple spent a year “saving really hard” and watched prices rise. “There were definitely a lot of people looking when we bought ours,” she said. “It went to a multi-offer, so we had to offer them the asking price, but it was worth it to get the one we wanted.” Christchurch real estate agent Rob McCormack, co-owner of offices under the Harcourts Grenadier brand, said houses and sections were selling well. “There’s a feeling of optimism out there, and I don’t think it’s a dead-cat bounce,” he said. “If we do have a problem it’s getting stock. We don’t have the supply, but there is certainly the demand.” Rising prices made properties hard to value, and more sellers were prepared to auction their houses, McCormack said. Statistics New Zealand figures show house-building has been at its lowest point for several decades. About 1500 consents for new homes are being issued each month by councils, half the number from six years ago. The Real Estate Institute’s figures show prices rose in 11 out of 12 regions in the past year, with the national median price of $360,000 up 9.6 per cent on December 2008. Of 4957 sales across the country last month, 58 per cent were under $400,000. Homes sold in a median 33 days. In the Canterbury-Westland region, December’s median priced matched the February 2008 high of $320,000 after rising 7 per cent in the past year. Median house prices in other regions in the year to December were, with annual price growth in brackets: Nelson-Marlborough $343,500 (14.5 per cent), Wellington $400,000 (8.1), Southland $184,000 (10.84), Otago $230,000 (unchanged), Central Otago Lakes $432,500 (1.16), Auckland $470,000 (6.81), Northland $306,000 (minus 2.08), Taranaki $280,000 (7.69), Manawatu-Wanganui $230,000 (2.9).Come on. Look at the bigger picture and look whats going on. Now I know I am not qualified to rattle off any official stuff. But you have to ask the questions that will this price recovery actually keep going. And when they talk about median prices. The reality is that more higher priced homes have been selling in the last 6 months than in previous homes comparatively to the lower priced homes. From my understanding of going to peoples homes the amount I have been most people who own homes under the 400k mark are finding the times tougher and arent moving.
Compare that to many people who are downsizing their homes at the moment. People in bigger houses in posh locations looking to downsize and have something with smaller mortgages. The reality is that people out there still worry about the prices of homes. Our home affordability allbeit better than previous years is rising fast and is one of the most expensive in the world.
On top of all of this you have to keep in mind we still have an extremely low OCR which is tipped to rise by June this year kissing good bye to the relatively cheap money we have had access to for the past 12 months. Bollard has tipped a mid-year increase in the official cash rate from its current record low 2.5 per cent but the market is anticipating he will start as soon as March and have hiked the OCR by 75 basis points by June 30.
I am sorry to say but if you look at the signs they do not paint a pretty picture. The average Kiwi is going to be priced out of buying a home. And if they do they most certainly will be stuck with a massive mortgage.
I feel the Real Estate industry shouldnt be telling the country that house prices are heading to an all time high. Its just not healthy to be doing this at this time. Sellers will start to expect higher prices. Great if your a home owner though. There is a drought of listings at the moment. A sure sellers market. So what the industry needs to do is attract more listings. Which is what the article above will most certainly do. Before you buy or sell right now make sure you do your research on true facts as there are too many conflicting opinions out there, including mine. But you need to look at cold hard numbers and look at the trends.
Good luck.
[...] a different picture that was being painted last month when the authorities were talking about the market in December. It is clear that there is a huge amount of instability within the market place. People are unsure [...]