To view a copy of this months BNZ – REINZ Residential Market Survey, click on the following link: BNZ – REINZ Market Survey 7 Dec 2011

In Summary
“Our latest survey has shown little change in perceptions of the state of the market over the past month, but some fairly clear buyer and seller trends.  Agents have reported no change in the number of people going through Open Homes, mildly improving auction clearance rates, a strong percentage of Written Sales turning Unconditional, and continuing growth in the number of potential vendors seeking appraisals.

But investors still show no change in activity whereas a continuing strong net 29% of agents report more first home buyers entering the market. This is probably the strongest feature coming through in our surveys over the past few months. A net 17% of agents say they feel sellers are more motivated than buyers – meaning they perceive that there is a buyers market. But a net 10% also report that they feel prices are rising.”

To view this weeks Overview click on the following link: BNZ Weekly Overview 8 Dec 2011

Mission Statement

To help Kiwi businesspeople and householders make informed financial decisions by discussing the economy and its implications in a language they can understand.

Is Our Economy Getting Better?

Housing Market Update

What Do The Leading Indicators Say?

Major Offshore Issues

Interest Rates

Foreign Exchange

In summary…

First Home Buyers Increasingly Apparent

Our fifth monthly survey of licensed real estate agents around New Zealand has found continuing growing interest from first home buyers but increasing withdrawal by investors, and a strengthening perception that prices are rising rather than falling. However there are some substantial differences at the local level with Auckland characterised by strong buyer interest and rising prices whereas in Wellington the sellers dominate and prices appear to be falling.

These remain early days in what we believe is the start of the upward leg in the housing cycle, and it is likely that the turbulence in offshore financial markets will inject some caution. But assuming things settle down overseas we expect the simple fundamental of a growing under-supply of dwellings in New Zealand made worse by construction at a four decade low, and now renewed chances of interest rates holding low for longer, will see the market gain strength. Of interest however will be the extent to which the Rugby World Cup then the general election may disturb the real estate and other markets.

Click on he following link to view: BNZ – REINZ Residential Market Survey 10 August 2011

Mission Statement

To help Kiwi businesspeople and householders make informed financial decisions by discussing the economy in a language they can understand.

Market Improving

New Zealand’s residential real estate market has started a cyclical recovery evident now in rising turnover, rising prices, decreasing number of days taken to sell a dwelling, a spike in listings shortages, and entry of first home buyers into the market. We anticipate improving prices and activity over the coming couple of years however there will be restraint from easing net migration inflows over the coming year, rising interest rates, high household debt and possible a structural lift in the savings rate, and already high house prices compared with incomes.

•  Turnover – Trending up from a low base
• Prices – Starting to move up
• Days to Sell – Slight quickening of pace underway
• Stock Availability – Tightening up nationwide, though some regions still replete with listings
• BNZ Confidence Survey – Listings hard to find
• BNZ-REINZ Residential Market Survey – First home buyers out looking
• Weekly Home Loan Approvals Survey – Mild lift to July 15
• Factors influencing the Real Estate Market
• Consumer Confidence – Caution returns
• Interest Rates – Support to decline now
• Migration – To turn negative
• Labour Market – To strengthen much more
• Construction – Worsening Shortage Has Price Implications
• Population Projections
• Taking Out A Mortgage – Information For Migrants

 Summary

New Zealand’s housing market is trading at low levels with prices on average still some 4% below late-2007 peaks, construction near the lowest levels in four decades, and turnover less than half that seen in 2003/04.

However there is a shortage of property now manifesting itself in agents reporting a sharp increase in difficulties finding new listings. This is happening at a time when more and more first home buyers are entering the market in an environment of increased discussion of the shortage, awareness of upward creep in rents and prices, and with interest rates set to come off their four decade lows.

While high levels of debt and low affordability by world standards will tend to constrain the extent of the housing upturn, barring a new global economic catastrophe, it appears that New Zealand’s housing market has started a cyclical upturn.

To view the full report, click on the following link: BNZ Real Estate Overview 26 July 2011

Mission Statement

To help Kiwi businesspeople and householders make informed financial decisions by discussing the economy in a language they can understand.

• Increasing Buyer Activity Evident
• Is the number of people going through Open Homes increasing or decreasing?
• Is the proportion of Written Sales going unconditional increasing or decreasing?
• Are auction clearance rates increasing or decreasing?
• Are requests for appraisals increasing or decreasing?
• Is the number of investors looking to buy increasing or decreasing?
• Is the number of first home buyers increasing or decreasing?
• Do prices appear to increasing, flat or decreasing?
• Who appear more motivated to transact – the buyers or the sellers?
• What are the main factors holding buyers back?
• What are the main reasons Written Sales fail to go unconditional?
• What are the main factors motivating vendors to sell?

Summary

Around most of the country there is evidence of more buyers in the residential real estate market though they tend overwhelmingly to be first home buyers rather than investors. In most of the large centres prices are perceived to be rising and in those centres buyers are more likely to capitulate to transact than sellers. But there remain some notable areas of weakness outside the main centres.

 To read the full report click on the following link: BNZ REINZ Residential Market Survey – 13 July 2011

Think of selling? Contact Bayleys Agent Robert Ashton AREINZ BE (Structural) m. 021 633 398

To view a copy of the latest BNZ – REINZ Real Estate Market Survey Dated 10 June 2011 click on the following link: BNZ – REINZ Real Estate Market Survey 10 June 2011

Given the Reserve Bank’s stated desire to rely upon real data, presumably rather than sentiment measures, when making their policy decisions, the fact that sentiment has soared does not automatically translate into a heightened chance yet of an early tightening of monetary policy. That however is where the risks lie – dependent upon developments offshore which in recent weeks have turned for the worse again.

To view a copy of the latest BNZ Confidence Survey – click on the following link: BNZ Confidence Survey 6 June 2011

This is only the second month for this survey and it will take some time before we get a good feel of the normal readings for the various indicators, the impact of seasonal changes, and the extent of month to month volatility. But for now the results over a two month period suggest an improving real estate market but with little reason for believing prices are yet rising by much.

To view the latest BNZ – REINZ Market Survey click on th following link: BNZ – REINZ Market Survey 12 May 2011

This survey is based on responses from licensed real estate agents and includes responses to the followng questions:

Is the number of people going through Open Homes increasing or decreasing?

Is the proportion of written sales going unconditional increasing or decreasing?

Are Auction clearance rates increasing or decreasing?

Are requests for appraisals increasing or decreasing?

Is the number of investors looking to buy increasing or decreasing?

Is the number of first home buyers increasing or decreasing?

Do prices appear to be increasing, flat or decreasing?

Who appear more motivated to transact – the buyers or the sellers?

What are the main factors holding buyers back?

What are the main reasons people are buying?

What are the main reasons Written Sales fail to go unconditional?

What are the main factors motivating vendors to sell?

Click on the following link to view:     BNZ – REINZ Market Survey 20 April 2011

New Zealand is holding its own globally, with only a slight drop in prices Photo / Richard Robinson

By Anne Gibson – NZ Herald

New Zealand has ranked in the top 10 housing markets in the world, but prices have still dropped. It had one of the smallest price falls lately and is ranked alongside Europe for toughing out the slump. Real estate consultancy Knight Frank has released its international house price index which compared house price changes in the second quarter of last year with the same period this year. That showed New Zealand was ninth least affected out of 32 countries. “It now appears that house prices are starting to stabilise across the world,” said Liam Bailey, head of residential research at Knight Frank. BNZ chief economist Tony Alexander said the list of pessimists expecting house prices to fall was shrinking. Even one of the most powerful arms of the state turned out to be wrong, he noticed. And it has said so. “This week, Treasury revised away their previous prediction that average house prices would fall by 10 per cent over the coming year,” he said. “Now they expect prices will rise slightly, though wisely don’t predict by how much. “There are simply too many factors in play to take a solid stab at how much prices will move in the coming year or three. But unless one believes the world economy is going to slip back into a potential depression scenario there is little reason for believing house prices will fall.” . Not everyone is delighted with the housing recovery. BNZ managing director Andrew Thorburn this week said the country’s $130 billion overdraft was unsustainable. In a turn which surprised some commentators because of banks’ role in fuelling the property market, Mr Thorburn worried about consumers loading up with debt. Reserve Bank Governor Alan Bollard also fretted about the housing recovery last week. “We are always very alert to not wanting to spark off an unnecessary or unbalanced housing revival,” he said. Since the start of the year, housing market activity had increased. “Although still at levels comparable to previous recessions, housing turnover has risen noticeably from the lows seen through calendar 2008. “In addition, house prices have begun to increase, mainly due to unusually low numbers of houses being offered for sale,” Dr Bollard said. Real estate websites were also busier last month. Trade Me Property had 938,185 visitors, up 5 per cent on July. Realestate.co.nz had 395,965 unique browsers, up 7 per cent, Harcourts.co.nz had 185,687 (+5.83 per cent ) and Open2view.co.nz 124,646 (+9.51 per cent). Real estate agent Michael Boulgaris said cheap money was helping housing recover. “With the ASB cutting its floating mortgage rate by 65 base points to a new low of 5.75 per cent, the spring property boom is yielding increased confidence among buyers, vendors and agents,” he said.

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=10597115

Home buyers can expect mortgage interest rates to start rising by the middle of next year and be 3 per cent higher in 18 months, economists say. As widely expected, the Reserve Bank held the official cash rate unchanged yesterday at 2.5 per cent, because of a “patchy” economic recovery and uncertain outlook. The central bank repeated its concerns about the high kiwi dollar and the damage being done to exporters. Most bank economists do not expect further immediate cuts in the official cash rate or mortgage rates, though one bank still expects two more small cuts in September and October. But because interest rates are expected to start rising again, economists suggest home buyers borrow on a three-year fixed rate of about 7 per cent now, rather than risk short-term or floating rates of around 6 per cent next year. ASB Bank chief economist Nick Tuffley said low interest rates were “reviving” the housing market. House prices were stabilising, though prices remained high compared with household income and rent. “House prices are no longer extremely expensive, just expensive,” he said. Rising unemployment would work against price rises, though a housing shortage could see a brief short-term pick up. There was little risk of further big falls in prices. Bank of New Zealand chief economist Tony Alexander dismissed earlier predictions from some commentators that house prices could dive more than 30 per cent in the recession. The housing market was now recovering, although “it is not going to run away with itself for some time”, he said. Positive factors included the housing shortage, low levels of new home building, rising migration and low interest rates. But that would be offset by a continued rise in unemployment and more investors being burnt after borrowing too heavily at the peak of the market boom. But Mr Tuffley said rates would go higher, so people should leave a safety margin getting a mortgage. The economy should improve next year, so official cash rates could move back to about 5 per cent. “Given the uncertainty, it’s not bad to hedge your bets fix some debt for two to three years and have some on six months.”

http://www.stuff.co.nz/business/personal-finance/2705789/Fix-your-mortgage-home-buyers-told

With so many different housing organisations around, it is sometimes difficult to know where to turn for accurate and up-to-date information. Photo / NZ Herald

A spring recovery or a year in the doldrums?

By Anne Gibson

The housing market is all over the place if the reports from a throng of organisations lately are to be believed.

Our housing sector has a confounding array of statistics issued by many different outfits, each with their own agenda.

Every month about half a dozen organisations get lippy about housing, saying what they think the housing market is doing, why and what they expect it to do next.

All that get lots of publicity but most of them say different things depending on how they reached their calculations, what they measured, what time frame they used, whose interests they were serving and what audience they were aiming at.

Precisely who is right or wrong is up for debate. For renters, home owners and buyers, the picture is as clear as the view out a dirty window.

Most of us know the housing market is not in great shape right now but is it about to make the spring rebound being predicted this week by realestate.co.nz?

Do we have a looming shortage of housing as BNZ chief economist Tony Alexander also said this week?

Is now the best time to buy as the agencies say or should people hold off?

One thing many of the experts agree on: QV has the best data and is most trusted. And its latest data set shows the market picking up somewhat – or slowing down less.

The Economist uses QV in its international list of more than 20 countries and we’re in the middle between The Netherlands and Spain in terms of price falls.

Not as bad as Singapore (-21 per cent in the last year) or as good as Switzerland (+5.3 per cent) but hovering somewhere in-between.

Many economists rank QV the highest in terms of accuracy and that says prices are down 8 per cent on a year ago.

UBS economist Robin Clements said the trade-off on the various statistic sets of data bases was always accuracy versus timeliness.

“QV is the final word on house prices but comes out with a long lag. QV’s monthly ValueMap is more timely but doesn’t perfectly reflect the quarterly data. REINZ is also timely.

“Its sales is a good lead indicator on consents but its median prices can be volatile compared with QV. Harcourts and Barfoots are even more timely on sales and prices but you have to recognise they are not the whole market,” Clements said.

Business Herald economics editor Brian Fallow compares the many house price reports to flickering strobe lights in a nightclub.

“If you link them all together, you might get some idea of what’s going on but it’s not a calm or steady illumination of the scene,” he said.

Each organisation can reach opposite conclusions about the market even within the space of four weeks.

At the beginning of June, REINZ said prices were dropping but sale volumes had picked up.

At the start of May, it said the opposite. Both were undoubtedly true, but what can be concluded from that?

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=10582431&pnum=0

OPINION: There is growing evidence that the New Zealand economy is near the bottom of the economic cycle and we can expect some growth to resume in the very near future.

But such growth is likely to be quite muted and we would suggest business operators remain strongly focussed on managing cash flows and undertaking lumpy expenditure only when their cash flow and capital and debt raising abilities are in strong safe zones.

One of the factors which will be constraining growth for the next couple of years is a still very weak world economy. Our trading partners usually grow 3 percent a year. But this year they are expected to shrink by over 2.5 percent and next year only recover 2 percent if things turn out well. That means it is unreasonable to expect a sizeable jump in our export commodity prices in the near future and this will in particular keep the dairy sector under pressure.

There will also be some pressure on a few exporters from the Kiwi dollar’s high rate against the greenback. To be near US64 cents at this stage of the economic cycle is extremely unusual and it is only small solace for exporters that we are still well below average against the Australian currency, Euro and Japanese Yen.

There will also be some restraint on the speed with which growth improves because of rising unemployment. There are still plenty of businesses who need to cut staff numbers and this process is likely to continue into next year.

Having said that, awareness of the structural shortage of labour in New Zealand is strong so this will tend to produce a firm lift in the number of employers looking to hire people when the labour market does in fact turn around.

Restraint on growth over the next couple of years will also come from the tightening up of bank lending criteria. The problem for the world in recent years has been too much money lent to too many people. That is now changing and while so far a lot of the changes have been voluntary there will be tighter restrictions and capital requirements put in place by central banks.

This is most relevant overseas but also has some lesser implications here where the lending surge was far more muted – apart from in the farming sector where debt growth has exceeded our expectations over the past few years.

But while growth will be constrained over 2010 and 2011, it should be growth nonetheless with assistance from a range of things. These include the low levels of short term interest rates and the lagged effect of tax cuts in October last year and April this year. There will also be stock-building undertaken by companies, and individuals will at some stage catch-up on delayed expenditure on large items such as fridges and motor vehicles.

These buyers have also been aware of the expectations we have been writing about here regarding net migration flows soaring. The strong surge in migration we have been expecting is now solidly underway with the annual flow now up from 3,500 in November last year to 11,200 in May.

A net gain of at least 20,000 looks likely later this year and it will be interesting to see where the net flow goes once we see a decent lift in the number of people coming here. So far it is a 21 percent fall in the number of Kiwis leaving our shores, which is boosting the migration numbers.

*Tony Alexander is the BNZ’s chief economist.

http://www.stuff.co.nz/business/opinion/2527378/Economy-inching-towards-growth

We have learnt nothing over the past week to alter our view on where interest rates are likely to go and what we think the best thing to do at the moment is for the average borrower. So if you read last week’s WO then you’ll gain nothing new this week. For those who did not read last week the guts of it is that if you are sitting floating waiting for the optimal time to fix – you missed it by three months!

But seriously, it is quite unlikely that fixed rates will decline from current levels so there is little point in hanging off if fixing is your goal. But there is not anywhere near the same need to act quickly as there was in March and over April because the strong NZ dollar is going to limit the extent to which wholesale interest rates rise in the near future. Personally I would fix three years though for many people floating is optimal because it is the only way to get an affordable debt servicing cash flow at the moment. If you are in that position – then frankly you may be taking on more debt than you can really afford.

Interest rates are below average at the moment and if you are floating you should be budgeting for 2% – 3% rate rises a couple of years from now. Run your numbers on that basis and see if you can truly afford the debt you are planning to take on.

As we noted last week, for business borrowers the dynamics are a bit different because there is a larger gap between low floating and highish fixed rates than for home owners. This different yield curve situation mainly reflects the fact that we NZ banks have traditionally competed for mortgage business using fixed rates.

Across the ditch the dynamics are different with competition mainly using floating rates. Don’t know why.

For business and farming borrowers there are strong cash flow advantages from floating. But be sure to budget for 2% – 3% rate rises two or so years from now. If you work out your debt servicing costs based on current low floating rates then you are setting yourself up for a major problem 2-3 years from now.

By Anne Gibson – NZ Herald

The property downturn wiped $60 billion off the value of our national housing stock and $25 billion from Auckland last year, says an industry commentator. Kieran Trass, an Auckland property investor and analyst, yesterday released a report citing QV numbers showing the downturn resulted in Auckland house prices declining by an average of $50,000. QV said last week that national prices had dropped 9.2 per cent in the three months to April compared to the same period last year. Mr Trass said some parts of the country suffered more than others, and cited a 16 per cent drop in Mt Roskill house prices last year. The slump was New Zealand’s worst since records began in 1961, he said. BNZ chief economist Tony Alexander checked the figures and said Mr Trass was correct. The Reserve Bank’s monetary policy statement showed the national value of housing stock was $568 billion by the last quarter of 2008, well down on the $614 billion in the last quarter of December 2007.

Mr Alexander said house prices dropped dramatically during the 1970s, but inflation was high then, too, so one factor offset the other. “Real house prices fell away in the 1970s but nominal house prices would not have decreased as much as they did last year. “During the 1960s, there was no nominal annual house price fall, nor during the 1970s and 1980s, but in 1991 there was a nominal fall of 3 per cent and in 1999 a fall of 4 per cent. “So in nominal terms, Mr Trass is right on the mark, no worries,” Mr Alexander said. But he discouraged New Zealanders from becoming overly concerned because most people were not real estate investors and their financial wellbeing did not depend on short-term capital gains. “For most people, it’s not a worry, but it would be if this continued at the annual rate because people would lose so much of their wealth they would decide it’s better to take bankruptcy, walk away from the mortgage and the house,” Mr Alexander said. The economic outlook indicated a recovery and he said house price drops of more than 9 per cent were highly unlikely to be recorded for this year. Real Estate Institute president Mike Elford also said Mr Trass’s figures made some sense. He said that with a median price of $350,000, the country’s 1.4 million houses could be worth more than $500 million. So a $60 billion drop based on last year’s 9 per cent QV value fall was not unrealistic. Mr Elford encouraged people not to focus on any losses. He said the feedback he was getting from real estate agents nationally confirmed his belief that prices would rise again soon. “It appears to me that we are at the bottom of the market.”

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=10573123&ref=rss

May 11 – Confidence has soared in the latest survey of 18,000 readers of the BNZ Weekly Overview, as global optimism rebounded, equity markets rallied and economic data in the U.S. and Australasia was better than expected.

A net 27% of respondents to the BNZ Confidence Survey expect the economy to improve over the next 12 months, up from a net 0% last month. The improved sentiment matched the previous record high of the series last September, just before the collapse of Lehman Brothers Inc. The BNZ series typically has a close correlation with the more closely-watched National Bank Business Outlook survey.

“Over the past two months world markets have backed away from the Great Depression scenario in the face of a multitude of better than expected data releases offshore,” chief economist Tony Alexander said. “Unless world economic data turn down again, there will be continuing upward pressure on fixed borrowing costs.”

Among figures in the past week, New Zealand’s jobless rate rose to a lower-than-expected 5%, according to the Household Labour Force Survey, while Australian unemployment defied expectations, falling to 5.3% from 5.7%. The NZX 50 index has gained 9.2% since the start of April.

The New Zealand dollar held at a five-month high 60.90 U.S. cents, up from 59.39 cents in New York on Friday.

Global optimism has lifted investor appetite for high-yielding, or riskier, assets and helped stocks rally. The Standard & Poor’s 500 has gained 16% since the start of April. The U.S. shed a less-than-expected 539,000 jobs last month, according to data from its Labor Department, while the unemployment rose to a 26-year-high of 8.9%.

(Businesswire)

http://business.scoop.co.nz/2009/05/11/sentiment-soars-in-latest-bnz-confidence-survey/#more-7095

The latest BNZ confidence survey shows a net 27% of respondents expect the economy to be better in a year’s time.

BNZ chief economist Tony Alexander said, “This is well up from balanced expectations in April and a net 23% pessimistic in March. It is also the equal highest reading on record – though we interpret this more as a sigh of relief lift in confidence rather than an indicator of strong economic activity levels in the near future. “

He said the survey reasonably predicts the change in confidence which will be reported at the end of the month in the NBNZ Outlook survey which is more details and longer running.

The correlation is shown below:

UPDATE:

To put this in perspective, while improved confidence is welcome, it doesn’t signal a boom. 

For example accountants reported they were busy with more advisory and budgeting work and clients were slow in paying. 

There was a notable absence of generally negative comments from the agriculture sector which was cautious overall. Vets were upbeat but rural real estate was depressed. 

Architects reported low activity levels with patchy signs of improvement while construction showed mixed up and down signs and there were some positive signs in engineering though the sector wasn’t busy. 

Forestry/Manufacturing/Sawmilling reported some positive signs from offshore but indicated some businesses were likely to fail.

There was a little optimism in horticulture with interest from overseas markets but the sector reported labour shortages.

 Human resources reported low activity levels with some mild signs of improvement. 

Printing and publishing said business was difficult; property development was very bleak; non-residential real estate tenants were reluctant to commit though investor interest was improving and residential real estate reported a significant shortage of listings with multiple offers and properties selling quickly.

Retail was still weak while tourism and travel were getting weaker and worrying about the coming year. 

There were small increases in transport and storage but overall the sector was weak and the vehicle and automotive sector was still weak.

That’s certainly the view of many commentators – and it seems buyers agree. Weak sales at the start of the year gave way to booming sales in March. REINZ reports that sales are particularly strong at the lower end of the market, and BNZ economist Tony Alexander suggests that ‘holding off’ is no longer the best strategy for prospective house buyers.

 In his BNZ Weekly Overview of 26th March, he says:  With a fundamental shortage of houses in New Zealand, construction plummeting, yet net inward migration possibly at the start of a boom, holding off buying in the hope of either lower prices or a wider range of choice seems risky. The risk reward trade-off no longer argues in favour of the optimal strategy last year which was hold off. If I were a buyer I would be inclined to purchase now. After all, even the unemployed need somewhere to live, plus even migrants with places offshore they cannot sell also will need somewhere to live. Both factors bespeak of support continuing at the lower end of the rental market in particular.

 He also talks about the correlation between migration and house prices:The two graphs to the right help explain why we are not pessimistic about house prices. (see link below for graphs)  The first shows a clear correlation – with squiggles along the way – between annual net migration flows and dwelling turnover. It supports our view that real estate turnover has bottomed out. This second graph shows the correlation – an even better one – between net annual migration flows and house price inflation.

Based on his prediction that population growth is likely to be between 15,000-30,000 over the next year, it seems reasonable to expect the housing market to strengthen further still. Given that most migrants and returning New Zealanders settle in the greater Auckland region, this region should benefit the most.

See  http://www.crockers.co.nz/services/research/latest.html for more detail.

 This article was shared with you by the conveyancing team at Auckland property law firm | Quay Law.  To contact our lawyers. 

The Bank of New Zealand’s chief economist Tony Alexander is a respected commentator regarding all aspects of New Zealand’s economy.  If you would like to subscribe to his informative weekly economic commentary click here.

Here is an extract of Tony’s 5 March 2009 comments on “if I were a house buyer what would I do?” -

The range of choice available to a potential buyer is very wide. Vendors are relatively motivated. Financing costs are lower than any sane person thought possible a year or even a few months ago – and further slight downside beckons. An old rule of thumb says that for any asset market you should not try to pick the top or the bottom. Always be prepared to sell when buyers abound and sacrifice the last portion of price gains. And be prepared to buy while range of choice is superb, holding back from trying to extract the last 5% – 10% from the purchase price.The big bugbear here of course is the prospect of a decent hike in New Zealand’s unemployment rate.  Though lets be a bit more specific here. With population growth accelerating the unemployment rate is not going to be the most accurate labour market indicator to use when gauging pressures on the housing market. Over the past year while the unemployment rate has gone from 3.4% to 4.6% employment has continued to grow – by 1% or 21,000 people. We think employment numbers will decline, but percentage wise considerably less than the unemployment rate will rise. 

What this means is you need to watch for yourself getting overly pessimistic about the housing market based on unemployment numbers when it is employment which actually matters.

If I felt there was a good chance I would get laid off in the coming year and I could only just meet a 20% deposit at the moment I would not buy a house because of the chance I could not continue to meet mortgage repayments. If however I felt the chances were good for continued employment then I would be out seriously looking at the moment. My view remains that the best buying opportunities in general in the current market will occur before the middle of this year.

This week (Jan 20th 2009) Tony shared his view about the property market by putting himself in the shoes of a house-buyer:

I might have had a look at buying a property 12 or 24 months ago but found that the numbers simply did not stack up because the debt servicing cost was too high.  But I would run the numbers again assuming a 5.5% five-year fixed interest rate and see what affordability of my preferred property would look like.  The chances are that a very large number of people are going to find property extremely affordable this year and this is likely to add to demand and therefore limit the downside for prices.

The 5 year fixed 5.5% interest rate Tony talks about is a rate he predicts will occur before the end of 2009.

My personal opinion is that that rate should be” jumped on” when it occurs because I quietly suspect that 10% plus interest rates might be the norm from 2011 onwards.  The great thing about a blog is that you and I will be able to re-visit this post to see if I was right or wrong!