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RealNews from May 2016:
Values in Wellington rose 3.1% in the first three months of 2016. QV stats show rental yields, like most of the rest of the country, are mostly under 5% after expenses. However, inner-city areas are more like 7%, some of the highest rental yields in the country. This is because apartments tend to give you a higher rental return than free-standing homes, and more modest homes give a higher return than higher quality homes. Wellington values are now 12.6% higher than 2007, while Christchurch is nearly 30.0% higher and Auckland is 70.0% higher, which may mean that the market in Wellington still has room to grow.
Should You Wait Until Prices Are Higher?
First home buyers are keen to find homes, but people who already own homes are deferring moving on, which means there is a real shortage on the market right now. If you are planning to trade down, or to leave the market, eg get rid of your investment property, or move overseas, then deferring the sale makes sense. However, if you want to trade up, now’s good! If you sell at $400,000 and buy at $600,000, your new mortgage will be $200,000. But if you wait until your $400,000 property is worth $440,000, then your new home will probably cost you $660,000, so your new mortgage will be $220,000.
Will House Prices Drop?
The house-price-to-income multiple is a simplified internationally-recognised measure of housing affordability. A median multiple of 3.0 times or less is accepted as a good marker for housing affordability. In Wellington City, the median multiple is now 5.51, and in Auckland Central it’s 10.87 times, up from 5.1 & 6.4 times respectively ten years ago. So homes are definitely becoming less affordable.
However, there are not enough new homes being built to keep up with demand, as tougher financial conditions elsewhere in the world cause expat New Zealanders to come home, fewer New Zealanders to move overseas, and more immigrants to come here. So buyers are competing for a scarce resource, and prices go up. Meanwhile, the 70% of New Zealanders who already own houses don’t want the value of their biggest asset to drop. So if home-building capacity increases, and the population increase levels off, prices could go flat again, but they are unlikely to drop – I suspect that any government which engineered a drop would be voted out.
Are Investors “The Enemy”?
Many people think that investors are the ones causing prices to rise, and hence stopping would-be first-home owners from getting a home. However, most investors are unwilling to pay a premium to secure a particular property – it’s usually owner-occupiers who will do that. Meanwhile, investors are providing homes for the one-in-three households who can’t buy their own homes, and many investors will not put the rent up for years if they have a tenant who can’t afford more, but can’t get a state house either, and has nowhere else to go. Yes, investors are seeking a return on their hard-earned capital, but they are also meeting a social need.
Lawyer or Conveyancer?
A registered conveyancer can act for when you buy or sell a property, but there are fish-hooks. A lawyer’s undertakings are enforceable under law, but a conveyancer’s undertakings are not. So a vendor’s lawyer doesn’t need to release the title documentation to the buyer’s lawyer until the settlement money has been received. However, a vendor’s conveyancer must provide a “reverse undertaking” and release the title documentation to the buyer’s lawyer before the money for the property has been received.
Lawyers can also advise you on whether to buy the property in your own names or a trust, and set up a trust if you need one; and can draw up and witness the other documents you might need when you are buying a property, such as bank guarantees, relationship property agreements, wills, and enduring powers of attorney.
Personally, I prefer to have someone as highly-skilled as possible to act for me so that I will be better-protected if things go wrong, and hence I have always used a lawyer for my own property transactions.
My Moving Van
My van enable me to dress the property at 196 Hanson St myself, and move the furniture back out when it sold, and to sell and drop off a surplus fridge for my vendor. It has been used several times for a couple who are doing up a house for their daughter to move to, and redecorating her existing unit ready for me to sell it. It was used to transport masses of clothing and racks for the Second Chance Trust’s annual sale, helping the Trust to raise over $20,000 for scholarships. It’s about to move a client’s tenants into their own home. And when clients don’t need it, I lend it out in exchange for donations to charity – call me if you would like to do this.