Last year flat, 2011 looking up

A review of 2010 shows the property market was fairly flat, but values appeared to be stabilising at year-end and the volume of sales looks set to increase in 2011.

In its review of 2010, valuation and property information company QV says residential property values rose for the first few months of the year, continuing a trend from mid-2009, then began to gradually decrease in most cities and regions.

The rate of decline slowed towards the end of the year though, which suggests values may be stabilising in some areas according to QV, which notes that while in 2010 property prices fell around 10% from their peak in 2007/08 nearly half of this had been clawed back by the end of year.

QV Research Director Jonno Ingerson says low sales volumes were the most notable feature of the residential property market throughout 2010, which he describes as a buyers' market.

"Between June and September volumes were at the same level as 2008 during the recession, 28% below 2009, 27% below the long term average, and 57% below the peak of 2003."

Mr Ingerson attributes the limited sales volume to factors including low consumer confidence, financial pressure and the tight lending criteria banks had until the end of 2010.

Meanwhile, the latest survey carried out by qv.co.nz has given an insight into what might be ahead in 2011.

The December survey found there were now more people intending to buy and more intending to sell in the next 12 months than was the case in June 2010.

It also found more people believe that prices will rise in the year ahead than those who believe they will drop, which was a turnaround on the June survey findings.

According to Mr Ingerson’s analysis there are signs an oversupply of property for sale may continue for the first half of this year.

"[However] at some stage the lack of building activity in recent years combined with a steadily increasing population is likely to lead to increased demand for housing and therefore a stabilisation and subsequent increase in values."

New Zealand real estate sales figures

The latest data released by the Real Estate Institute of New Zealand shows that while the median settled sale price fell slightly from $360,000 in November to $352,000 in December, this was still higher than the figure in July, August, September and October.

In addition the latest figures show the median time period to sell a home has continued to decline, steadily falling from 45 days in June to 39 in December.

Month	Median price	No. of sales	Median days to sell
December 2010	$352,000	4397	39
November 2010	$360,000	5138	40
October 2010	$350,000	3905	41
September 2010	$350,000	4323	43
August 2010	$350,000	4287	43
July 2010	$349,000	4411	45
June 2010	$352,500	4575	45
May 2010	$350,000	5206	43
April 2010	$356,000	5207	40
March 2010	$360,500	6161	35
February 2010	$350,000	5029	46
January 2010	$350,000	3666	43
December 2009	$360,000	3957	33
Source: Real Estate Institute of New Zealand

Rental prices (New Zealand totals)

The latest rental statistics released by the Department of Building and Housing show that median rental prices across New Zealand have continued to increase. In terms of supply, Trademe had a notable increase in rental listings in December year on year – however this could be due to increased usage of that marketing channel rather than a true lift in supply.

October	Median Rental		Range		Number let
Number. of rooms	2010	2009	2010	2009	2010	2009
One	$225	$215	$160 - $290	$160 - $280	1068	1653
Two	$290	$280	$240 - $350	$230 - $340	1973	3215
Three	$340	$335	$295 - $400	$290 - $395	2356	3865
Four	$440	$400	$360 - $550	$340 - $510	606	1030
Source: Department of Housing and Building

Property Talk: New call for CGT

A new call for introducing a capital gains tax (CGT) has reignited the debate.

Without any obvious conflicts of interest Auckland University tax lecturers have at least called for a comprehensive CGT as opposed to calls early last year for a selective tax for rental property.

However they then contradicted themselves by suggesting exclusions, such as $300,000 for a personally-owned home or items owned for personal use, which in my opinion reduces their argument that a CGT is not complex and is not affected by exemptions.

If a CGT is to be fair and non-distortionary, it has to include ALL capital gains including personal homes, shares, businesses, gold, art etc. After this has been accepted, then we can look at whether it’s a good idea.

My view is that it is not. We want to grow New Zealand's economy, and that is not going to be achieved by increasing taxes.

How would a CGT encourage investment in the "productive sector"?

For example, would someone be incentivised to start up and build a successful business or to takeover and invest in a turnaround when a CGT would lower the profit available to them when they sell it?

Why would an overseas investor look to New Zealand if it has a CGT but similar opportunities exist in other countries that do not?

The flood of replies in support of the lecturers shows the bias of attitudes and people's inability to comprehend what is actually being proposed. Invariably they all say it’s wonderful as it will stop investment in rental property. What they have not calculated is the affect such a tax would also have on business.

I think a CGT would simply channel more money into the financial services industry, which already effectively receives state funding through KiwiSaver commissions.

By Andrew King, Vice-President of the Property Investors' Federation.

Net returns from rental property increasing

A recent study has found rental property returns have improved over the past two years.

The Residential Property Investors report, compiled by interest.co.nz, is based on analysis of key influences on returns to show profit after-tax as a percentage return on the equity invested. It also assesses potential capital gains.

According to the study, rental property returns after tax and capital returns have improved significantly in the last two years and while volatile they have been higher than bank returns for much of the last four years. The comparison is less favourable when looking at rental property returns before capital gains.

The Southland region and four cities – Gisborne, Wanganui, Timaru and Invercargill – all currently deliver "superior" operating returns the study found, and Rotorua and Dunedin may move into that category in 2011.

This report has been published courtesy of Stu Jenner - Harcourts, to view Stu's listings click here

Posted: 28 Jan 2011