Most of us have read, and been alarmed at the recent media coverage of the current and future directions of the housing market. There is the choice of believing that now is a great time to buy and the market is little changed, or that falls of 30% or more will be seen during the next few years. But what do we believe and how do we react to it. The information below will not tell you but should let you in on whats happened in the market to date. The magiority of the media focus on the major markets such as Auckland or Wellington. All in all everyones markets are driven by the same factors but is Taranakis market affected as much as the media are portraying?
In New Zealand between 1999 and mid 2004 the Official Cash Rate ranged between five and six percent, but has then steadily moved upwards to reach 8.25% in March 2008. This has forced floating interest rates to rise and put pressure on fixed rates. In the US, banks and other lenders suffered big losses in 2007 in the so-called ‘sub prime’ market and the implications for that are yet to be felt worldwide.. It is clear that international interest rates are on the increase due to the sub prime debacle, and as New Zealand banks source funds for fixed interest rates from overseas markets the current level of fixed rates is unlikely to reduce in the short term.
HOme affordability over the past decaude has declined as values rose, and more and more of our income has been needed to repay the morgage. This has been accepted by purchasers as long as property prices have continued to increase. The impact of higher mortgage interest rates, tightening lending standards, and higher living costs (particularly food and petrol prices) is affecting some property owners. Job security is currently good and the high levels of employment will help ensure that most New Zealanders are financially secure although some belt tightening may be needed.
But where does this leave the Taranaki market?
Well simply times are changing. For many years the vendor has been king, but since late 2006 the market has turned in the buyers’ favour. Even though the average price of a home in Taranaki rose by 3.9% over the last year the gap between vendors’ price expectations and that of purchasers has really widened widened. Many of the national market drivers are having an impact here especially the level of interest rates. We have the benefit of a strong dairy sector plus ongoing energy sector activity which continue to underpin the local economy and help local property markets. On the other side of this our market did not see the highs that the cities such as Auckland saw. This was majorly attributed to population growth. The heat in our market has been at a medium level rather than high, and has not boiled over, resulting in a simmering rather than a cooling. But this does not apply to all properties or locations. International trends show that in a flat or recessionary market buyers become more picky and take longer to make up their minds, while in a booming property market even poor purchasing decisions can seem like good ones. Our residential market is now flat, causing longer selling periods, choosy buyers, bargain hunting, and in some cases reductions in value. Some properties continue to sell well, but others are suffering.
The increasing number of advertised open homes shows the greater choice in our market. It is evident buyers continue to pay good money for the better properties (irrespective of value), but do discount properties with adverse features. Residential investors have backed out of the market at present which could have more of an impact on smaller townships in Taranaki where they have previously had a major influence. In Taranaki there has been not alot of change to the property prices but those people who have bought property in the later part of the housing boom who borrowed at high levels will now be facing the increased repayments on their mortage. This is starting to become more evident from the amount of mortage sales on the market now.
I dont see that the conditions in the market will change during the rest of 2008, and it will be an interesting and testing time for some property owners, but to the advantage of purchasers. In general vendors should expect prices to be flat or softening slightly. As you see the large number of open homes each weekend dont expect that buyers will not be lining up to buy. Vendors will need to appreciate this, and every offer should be treated seriously even if below the targeted price. Take care to avoid being forced into a situation where you need to sell quickly as this will result in a lower price being achieved. All property owners need to have flexibility in home ownership. Buyers have more time and should fully research the market and look carefully at each property as a mistake in purchase now may not, at least in the short term, be covered by value growth, as it has in the past.Low to average priced residential properties should remain saleable and hold value, but due to construction of many executive homes in recent years the upper range of the market may well see a softening, particularly if vendors are suffering from increased mortgage rates. Quality will be to the fore and is as least as important as location. We may well see a higher proportion of distressed sales but many vendors will ride conditions until buyers return in numbers.
The biggest advise i can tell prospective sellers or buyers is not to believe the national doom and gloom, it doesn’t fully apply to Taranaki. Investigate the market carefully and the property you are considering in particular. In other words look before you leap! When dealing in property it is particularly important at this time to take as much advice as possible.
Sales volumes in New Plymouth are down which is in direct proportion to the average sale time which is now 60 days in New Plymouth. When you are looking at putting the house on the market it is important that you get professional advice from people who are in the market. This includes agents, laywers and property valuers. Remember that we are all in the same situation and if your selling and then buying any disadvantage you may have had is cancelled out.
The most important thing is to price your home right. This is the key to this market. Reduced buyer activity means you need to be competitive. BUt this will come in the next blog edition.
Nice article SEO TIP you should link key words Back to your Own site UP TO 4-5 DIRECT KEY WORD LINKS great for one way linking strategy
Hey bill thanks for the comment,
mate how do I use tags. I love the little spinning thing you have in your website but how do tags work etc?