David Whitburn

I’ve been thinking. And I have been talking. I have been thinking about where the market is at right now and the strategies property investors need to adopt to continue to thrive. My very supportive and helpful network fortunately includes Harcourts top Auckland agent who really has his finger on the pulse as regards current market trends, and a leading Ray White agent who is quite simply one of the finest negotiators I have ever seen (whether working as a solicitor or property developer crunching deals). This morning and lunch they gave me their take on the wider Auckland market which I will share with you.

There are currently more buyers than sellers still, so simple economic principles supply.

If supply > demand = house prices rise

The number of days it is taking to sell their many listings is increasing in general though. Part of the reason is that there still seems to be a bit of a gap with many vendor’s holding out for top dollar, or been ‘sold to’ by an agent trying to buy their exclusive listing. The other part though is buyer confidence is a little bit down recently. The Interest rates and negative media attention is bringing a lot of fear into the market. This fear is translating into longer due diligence timeframes being required, less people buying unconditionally at present and buyers being more picky. An Interesting trend being observed is the number of people ‘downsizing’ their homes and of course home loans at the moment. I think that a few more people are doing this lately because they have been fixing for 6.{something} % for the past 3-4 years. That rate has now changed and gone up 2-3 more percent, so reducing their debt they consider to be a prudent course of action. As a result they are selling their homes and buying something often more than $100K cheaper, with a corresponding lower home loan.

In terms of the market, Camerson Bagrie, ANZ Chief Economist stated in his address to the Auckland property Investors’ association(www.apia.org.nz) on 10 May 2007 that he expects there to be no further Interest rises to perhaps at worst a further 0.5% Interest rate rises over the next two years. So he thinks like Tony Alexander, BNZ bank Chief Economist and my little sister Sarah Whitburn (Auckland University’s top undergraduate Economist 2001 and leading solicitor at Bell Gully – ranked NZ’s number one law firm) that this high Interest rate environment will be around for a couple of years. Sure it is crystal ball gazing for all of us – but I feel that the market will have this high Interest rate environment until 2009 too, before the new National Government which will win next year, is able to turn things around and have an export led recovery with lower Interest rate environment. These lower Interest rates will assist the high NZ dollar to come down, as yield hungry Global investors (also see good articles in Investigate and Unlimited magazines over the past year on this) will not choose NZ as the place to park theur savings into as the yield will come right down.

There is also an increasingly larger amount of traders in the market hunting down equity. With other drivers of migration (including the northward drift into Auckland, the nation’s economic hub) all factors are conspiring to very slow growth, with the real rate of growth (ie inflation taken out) being 0-3% over the next couple of years.

This of course will mean we cannot rely on the market to take us places as we could in immediately previous years. But it will also mean there are great opportunities out there. Opportunities as people don’t have time to wait the usual numbers of days to sell. People being squeezed by banks with higher Interest rates needing to find a quick solution (your purchase).

So don’t give up – just think carefully about what you are doing, and review your strategies. There is a lot of negativity in the market today, and it is all to easy to find an excuse to not do something and why you too, can do nothing. Then you can just be another slightly over broke ordinary person dependant on the government of teh day for the long returement years you are likely to face. This is the beauty of life – you call the shots and have your own destiny in your hands. “Save and prosper” Eileen Whitburn (1993) b. 1908 – d. 2002

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