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Mortgage Advice Blog

Get the latest news and tips about mortgage finance and the property market. Scott Miller, mortgage broker from Advanced Mortgage Solutions comments on housing and lending.

My property commentary

Published by Scott Miller on Tuesday, May 26, 2009 in

Well summer has definitely gone and winter has arrived, but despite the weathers best efforts there is plenty happening in the property market.

First I would like to go over some of the thought I have on where the property market is going.

I believe that the seasonal changes we are experiencing could not have come at a better time. In the last three months of summer we saw a rebound in the property market. Sales numbers were up, days taken to sell were down, and in April we even saw a small increase in the median houses price throughout New Zealand.

Traditionally winter always brings a lull to the market. Daylight viewing hours are less, the cold inhospitable weather lessens people enthusiasm for house hunting, and properties don’t look so good with leafless tress and muddy grounds.

BUT THAT’S IN NEW ZEALAND!

It pays to remember that in the big scheme of things New Zealand really is only a cork floating on the sea of international change, and we as a country don’t have that much financial clout. As New Zealand moves deeper into winter the northern hemisphere arrives into their summer and all the nice things about life returns to those who live north of the equator. As far as the weather is concerned the good times are back. (I was speaking with a client in London yesterday and it was 25 degrees, his kids were outside playing in the garden, happy days)

So the good feelings are back - but what about the global recession, how’s that coming along?

Well financially, stock and monetary markets have been making a slow but steady recovery, making up some of the lost ground they have experienced over the last year or so. Wall Street has seen a 19% increase in its markets since its lows in Dec/Jan, as have many of the European stock and monetary exchanges.

The implementation of recession busting government policies is also starting to have effect. TARP and similar schemes have gone a long way to oiling the wheels of finance, allowing companies, and individuals to lend money again. This combined with a reduction in interest rates for almost all countries has made accessible fund more affordable.

Now I am not saying that the world (or New Zealand) is out of the woods yet, but what I am leading to is that given the direction the markets and monetary policy is heading, we should be well placed to see some real change as we come into our spring. The feel good factor in the northern hemisphere coupled with rejuvenated business confidence will surely flow and bob the cork that is New Zealand. Expect to see unemployment reduce, net migration continue to increase, and house prices slowly rise as our summer takes hold.

As I mentioned at the start, personally the timing of the seasons

could not be better.

Tip of the Month:

Please be aware the new 95% product is going well with over 2/3being approved. If you find yourself looking to make that next purchase or simply want to know how you are placed to move forward please don’t hesitate to contact me.

Below I have added the latest commentary from the NBNZ.

Please read on as it makes great reading.

The month in review

Lower mortgage rates have given the property market a shot in the arm, although it has the feel of a statistical rebound from very low levels. The number of new homes being built remains weak. The Reserve Bank has committed to keeping rates low until the latter part of 2010, which will provide borrowers with a greater degree of certainty.

» Building Consents – March. Residential building consents remain very weak. Following an 11.7 percent increase in February, consent issuance fell 4.6 percent in March (-30 percent annually). Stripping out volatile apartment issuance, consents fell 1.3 percent following a 0.2 percent increase last month. The level remains near historical lows.

» Net Migration – March. NZ gained a net 1,720 people in the month of March, taking the annual gain to 7,482 (compared to 4,678 a year ago). In the March quarter, net migration was running at an annualised rate of 16,520 people, equivalent to 0.4 percent of the population.

» Mortgage Lending – March. Household credit growth rose by only 0.1  percent - despite all that frenzied mortgage fixing and increased housing market activity.

» REINZ housing data – April. Nationwide house sales recorded an impressive 19.6 percent seasonally adjusted increase in April, and are now up 39 percent on a year ago. The median length of time to sell a house improved to 44 days in seasonally adjusted terms in the month. This is down from 48 days in March and a peak of 57 days in July last year, although it remains slightly above the historical average of 39 days. House prices also continue to surprise, although composition issues with the REINZ data means that some caution should be taken. Nevertheless, the median house price rose $5000 in the month to $340,000 and is only down 1.4 percent on a year ago.

» RBNZ April OCR Review. The RBNZ delivered a clear message in its latest assessment of the economic situation by cutting the Official Cash rate (OCR) by 50 basis points and committing to keeping rates low until late 2010. In so far as central bank communication is concerned, the message was clear cut: if you are a borrower, don’t panic and rush to fix

for a long-term.

» Household Labour Force – March. In seasonally adjusted terms, employment fell by 1.1 percent in the March quarter – the biggest quarterly contraction since the March 1989 quarter. However, volatility in the employment growth measure of late almost makes the quarter-on-quarter movements redundant. We instead prefer to focus on the more stable unemployment rate, and while it rose 0.3 percentage points to 5.0 percent, judging by leading indicators it is set to rise further.

Assessment

The month saw further signs of encouragement in so far as housing related indicators are concerned. However, the level of activity still remains well down on the peak. Recovering house sales look to be leading the way and should start to flow into building consent figures in H2 2009 (which having hit 1960’s lows is simply unsustainable relative to natural population and

migration growth). But going forward we need to differentiate between the change and the base. The change is welcome but recovery means climbing out of a very deep hole. The big uncertainties are impetus from migration versus fewer jobs.


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