Property Market Update

Economic

New Zealand’s economic growth is forecast to remain positive, despite the slowing pace of expansion in the global economy. Recent GDP data released by Statistics New Zealand suggests, while growth in New Zealand’s economy is still on track, it is more subdued than previously forecast.

Continued strong growth in Australia and China will support demand for New Zealand exports, reinforcing the continued contribution of high export commodity prices. The Reserve Bank of New Zealand (RBNZ) paused at the latest official cash rate (OCR) review, holding the OCR at 3%. It is likely that the RBNZ will recommence the slow removal of monetary policy stimulis early in the New Year, as the aforementioned sustained economic growth progresses.

Residential

The Real Estate Institute of New Zealand (REINZ) released its most recent residential market survey in November. Overall the residential real estate market is moving up, with a rise in the number of vendors wanting to make a sale - meaning it's now more of a buyer's market. There is also a strong increase in buyer interest from first home buyers, as opposed to investors. For the fifth month in a row the perception of agents on average is that prices are rising.

As a result of the reduced sales volumes in recent months, the median sale price for residential dwellings is continuing to fluctuate. The median price achieved in October 2011 was $359,000 – up only slightly on the October 2010 median sale price of $350,000. It is likely that coming months will bring much of the same, in terms of sale price movements, as the residential property market recovers.

Commercial and Industrial

Along with New Zealand’s economy in general, national commercial and industrial property markets are beginning to display signs of recovery as illustrated by the index figures released by International Property Databank (IPD). The IPD index is based upon annual valuations of property within the national database of 366 properties with a combined value of approximately $8.2 billion.

The latest June quarter index shows all property annual total returns (see graph page 9) to have continued their recovery after returning to positive territory in the March quarter of 2010. The total return combines returns on income with capital returns and in the year to March 2011 stood at 5.9%.

Property Returns (see graph page 10) on income have remained fairly consistent, with the increase over the last year reflecting the general rise in yield levels. It is however capital returns, which display greater volatility. The slowing of the decline in capital returns reflects the fact that yields are now stabilising and that, while still under pressure, a majority of the falls in rental levels likely to emerge in the current cycle have now happened.

Country

Like all investment markets, rural property has experienced considerable volatility in recent times. However, it has been a strong performer over the long term and looks set to follow commodity prices upwards again. The rural sector will be encouraged by commodity prices showing sustained positive gains, with a growing global population maintaining strong demand for primary products.

The end of the last decade and the start of the next have been particularly trying for investors in the rural sector. Both the average sale price and the level of activity dropped sharply, with values shedding all of their gains from September 2006 to September 2008 in the year that followed. Subsequently, the average farm sale price has remained relatively stable, albeit with some price fluctuation on a quarterly basis. In keeping with most investment markets there has been a high degree of volatility in the value of farms over the last 18 months. Anybody investing in a rural property at the start of the last decade would have done very well for themselves, with the average farm value still increasing 150% from $631,000 in the first quarter of 2000 to just over $1,600,000 in the final quarter of 2009.

Article provided by Bayleys

What next?

 

Share or Bookmark
 
 

Working In Websites