Positive predictions for property
Thursday, January 22nd 2009, 12:44PM 
5 Comments
Here’s a few predictions to start the year with. Firstly, smart investors are buying and will make some great buys.
In the next issue of the NZ Property Investor we speak to many people who have bought properties in the past couple of months. The stories they tell are quite inspiring as they show that the numbers being achieved in this market are good. Property is starting to stack up as an investment option after years of being too expensive.
One of the reasons is that interest rates are low and continuing to fall.
My second prediction is that we will see home loan rates with a five in front of them within three weeks at the outside. It seems to be a race to see who gets to 5.99% first. It could even happen sooner as we have wholesale rates falling and banks working on what are fat margins (compared to the mortgage war era).
My third prediction is that while money is cheap, it won’t stay that way for very long. Later in the year we will see interest rates start to increase again (just like we have seen petrol prices rise in the past week).
A fourth prediction is that property will look very attractive. At the moment, low interest rates mean that real returns from bank term deposits are close to zero. Investors have to look at growth assets such as shares and property. Shares look ugly as the world markets go through turmoil, while property looks much better.
My fifth prediction comes from the effect of the first three. House prices won’t fall significantly in the next few months, with the exception of high-end property especially coastal retreats.
Buyers are out there looking and if there is enough of them, they will provide sufficient demand to stabilise prices. This won’t just be for properties which stack up as investments, but also for first home buyers and for families looking to take the opportunity to upgrade their home.
These people may even end up buying the property which has been put into the rental market by accidental landlords, the ones who couldn’t sell at a decent price in the second half of last year.
This is far more optimistic that what you will read in other places, but I reckon there are many positive things happening for property investors right now.
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Comments from our readers
On 23 January 2009 at 12:55 pm Ringo Chan said:
Your are right in certain points. However, I don't think it will happen in the next 12 months in light of the money crisis happening worldwide which might affect NZ's export where it is a maor source of income. Job market will not improve where we are seeing more laid offs, bankcrupts, bad debts all affecting the confidence of the investers and buyers, the first home buyers too. Despite the interest rate is dropping, there will not be much buyers if the second market or rental market is not active. On 23 January 2009 at 10:26 pm cam price said:
Theres always good areas that grow in any market.I believe the cheapest sections are the go in southland.I bought five last year and they have all at least doubled in value through what was recession.Sections now are worth around 30k. Thats 100% capital gain through what is suppost to be a grim time.Even beachfront wont do that in a boom.I believe its about affordability.Wait till the resources sector starts up again then they will do massive gains. The year before in 2007 they were selling for approx 2k.The good thing about southland is there is still room to grow with affordability,and high rental returns to gear off.
Although houses have come back land still seems to go up there .
Why waist ya kids putting there money in the bank when a mortgage on these cheapies is approx 40$ a week.
west auz was cheap once then the resources hit now its the most expensive.
lignite,coal,dairy,silicon and oil are just waiting for the prices to come back up then the south will dominate ....................jobs jobs
southland land is as cheap as fabric per metre no wonder is still rising
On 23 January 2009 at 11:29 pm Judith said:
I'm sure you've read Kieran Trass's book on the property clock or cycles and he is adamant that interest rates are NOT one of the key drivers. I also wonder whether the full impact of the economic downturn has hit home in NZ yet? I am a kiwi living in London & things here are bad - people are being made redundant everyday. I wonder whether NZ is really insulated from it or whether it will just take longer to trickle through. If I was someone who couldn't afford to lose my savings, or hold my properties through a severe downturn, I would sit tight. On 25 March 2009 at 1:31 pm steve said:
What a surprise to come onto a landlord blog and read "A fourth prediction is that property will look very attractive.". Ican feel the fob watch swinging in front of my face. I will make a prediction .... Because the property market is way over valued and has been for some time we will see a collapse of the market very soon. Just as the wall street cowboys are now having to face reality, this same reality will trickle through to Mr and Mrs Smith and the property that you bought for $80,000 10 years ago, and watch in gleeful disbelief as it rose to an illogical "market value" of $400,000 will settle at a more realistic 200-250K. Living in a dream world is all well and good but eventually the chickens have to come home to roost. If you didn't sell when it was too good to be true then you are a fool and probably deserve a more realistic result. Just like surfing ... the 3rd wave is the usually the largest ... we have just felt a ripple. Sell! On 4 November 2009 at 1:27 am Estate Agent Christchurch said:
Real estate investment has a lot of advantages and has a strong strong survival rate. It indeed looks positive. Commenting is closed
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