Now for some good news

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Thursday, May 1st 2008, 10:18AM 2 Comments

by Philip Macalister

Most of the talk in the media is all about bad news in the property market. There is no point listing the sorts of stories they run, but it seems, particularly on the weekends, that negative headlines sell papers.

Here at Landlords we like a bit of balance and reality on the situation. To us it seems there have been a couple of bits of good news for the market in the past week.

First up was the Reserve Bank's official cash rate announcement. To the ordinary bloke (or sheila) who invests in property, the statement seems pretty bland. But economists, who tend to specialise in decoding these official statements, reckon the bank had changed its stance on easing rates.

This time the central bank said that it "expect(s) that the OCR will need to remain at current levels for a time yet".

Previously it said that the OCR will stay where it is for "a significant time yet".
The economists reckon this is a big change and cuts could come earlier that the RBNZ previously suggested.

That's good news for the market. When rates start falling and banks become a bit more generous, the property market will accelerate.

I still reckon that when the market turns the corner and starts heading up it will do so quickly and sharply.

Secondly we had some migration figures, which again were positive. They showed a slight increase in the number of people coming to New Zealand.

There is a view that migration and the housing market dance together. The reason is pretty obvious. The more people we have coming to live here means that there needs to be more houses.

As BNZ chief economist Tony Alexander said: "This is actually the first positive piece of news for our poor housing market in a very long time."

While this post is about positives, it would remiss to say there is one negative. That is some research from Westpac which looks and the supply and demand balance for housing. Its key view is that they are roughly in balance. But it does suggest a slight oversupply of houses which is a negative for house prices.

I guess a few more immigrants will get us balanced again?

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