For better or for worse?
Like any relationship, the love affair New Zealanders have with property always has some ups and downs. The tensions between supply and demand, buyer and seller, state of the market and finance affordability and availability all add to this mix.
But if you are a follower of daily media comment about the property sector it’s conceivable you can easily be polarised to either a position of ‘better’ or one of ‘worse’.
That’s because that commentary or reporting usually only provides a ‘snapshot’ of events, or comment at any given time; it is seldom the full story of cause and effect, mostly just a record of particular consequence. And, like a small tiff in a relationship, it can easily grow out of all proportion if the wider perspective is not taken.
Take recent building consent figures that show third-quarter results were better than many were anticipating. In a flurry of reaction, various reports have taken that to mean that the recession is nearly over.
Reserve Bank governor, Alan Bollard has even been quoted as suggesting that the fall in economic growth associated with recession may well be bottoming out. And there are any number of economists who have already nodded sagely at that suggestion.
That, perhaps, is a ‘better’
But from a wider view, residential building activity is still down and expected to continue that trend well into the first quarter of next year. In fact figures show that consents for dwellings have fallen to levels not seen since the start of the 1990s.
But whether that’s for better or worse still depends on an individual perspective.
Some positives perhaps, are the fact that petrol prices have and are likely to continue to fall over the next few months. Interest rates, which have already fallen sharply over recent weeks look likely to fall some more. Economists reckon food prices are also likely to ease back, both because of seasonal supply and in response to some big falls in international food prices. Then there is another round of tax cuts kicking in from April next year.
All of which markedly increases household cash availability.
Ironically, in different circumstance, these ingredients would more likely indicate an impending property boom and not a property gloom.
The Bank of New Zealand, in a weekly overview December 2008 offered some key forecasts. Dwelling consent numbers to fall from 24,500 in the year to March 2008 to below 18,000 in the year to March 2009, with a slight recovery to March 2010, then above average activity after that as attention turns to a shortage of dwellings in late 2009.
Real Estate sales falling from 77,130 in the year to April 2008 to between 55,000 and 65,000 come the end of this year then recovering back to 65,000 in calendar 2009 with further growth over 2010.
House prices down 5-10% by the end of 2008, flat over 2009, rising slightly over 2010.
This suggests, given that a property relationship is fundamentally sound and any ‘tiff’ can be put into perspective or managed, that there is more likelihood of better and not worse on the mid-term horizon.
What may be even more encouraging are the (admittedly still tentative) suggestions from a growing brigade of expert commentators and economists that the current fall-off in residential construction will result in a dwellings shortage perhaps as early as mid-2009.
It will be interesting to see the expert interpretation of already existing greater household cash-flow, greater finance affordability through interest rate reductions and greater house price affordability, when that is all mixed in with a growing and unsatisfied demand for housing stock come next year.
Then will sentiment turn to richer, not poorer, for better not worse?