New Zealand house prices fell in May at the slowest pace this year, signalling the housing market may soon pick up and help the economy recover from a recession.

Average prices dropped 8.1 per cent from a year earlier, Quotable Value New Zealand Ltd, the government valuation agency, said in an e-mail report. The annual decline is the smallest since December.

Reserve Bank governor Alan Bollard cut the benchmark interest rate to a record-low 2.5 per cent in late April to help kick-start the economy, which is in its worst recession in more than three decades. House sales and home-building approvals are rising as consumer confidence in the housing market improves.

‘The wider market is moving toward some form of equilibrium,’ said Quotable Value spokeswoman Glenda Whitehead. ‘The recent buoyant activity has been fuelled by people taking advantage of lower mortgage rates.’ More consumers are inspecting properties and making offers, Ms Whitehead said. A lack of new listings is helping to underpin prices, she said.

A net 46 per cent of people surveyed in April said it was a good time to buy a house, ASB Bank Ltd said in a report last week. The net figure, which subtracts pessimists from optimists, has risen from 38 per cent in January.

New Zealand house prices began falling in July last year amid the global credit crunch and plunging consumer confidence. House sales fell to a record low in January and prices in March were 9.3 per cent lower than a year earlier.

Rising unemployment and tighter lending criteria from banks will slow the recovery in house prices, Ms Whitehead said. The government last week forecast the jobless rate would rise to 8 per cent by early 2010 from 5 per cent in the first quarter of this year.

Source: Business Times, 9 Jun 2009

New Zealand may not be the first place that springs to mind for property investment, but the depressed market makes it a good time to look at the land of snow-capped mountains and golden beaches.

Ms Sue Charlesworth, marketing manager at Southern Lakes Real Estate, told The Sunday Times: ‘The prices have certainly come down from the levels of 18 months ago…plus the New Zealand dollar isn’t very strong at the moment, hence overseas investment becomes more feasible.’

A year ago, the kiwi dollar was worth S$1.07 but it is now down more than 20 per cent to 85 Singapore cents.

Ms Charlesworth said the reduced cost of lending in New Zealand is also helping to make property investment at any level very accessible.

Prices are expected to remain relatively stable for the next few years, buoyed by increasing migration to New Zealand but capped by rising unemployment.

Residential property expert Andrew King, of Andrew King Property Management Services in New Zealand, believes that it could be a good time for investors to consider putting down money, as ‘cashflow is good while interest rates are low’.

‘An investment in New Zealand property would be a long-term hold as prices are not expected to increase for at least three years,’ he added.

Several New Zealand ‘island-like properties’ are being advertised on the website of Vladi Private Islands, which markets islands worldwide.

There are national sensitivities involved in the acquisition of such rare locations and they are protected by rules and regulations.

But the New Zealand government is planning to overhaul the Overseas Investment Act this year. This regulates the acquisition of ‘sensitive land’ by overseas investors.
Reforms may make it easier for foreigners to buy property.

Bayleys Real Estate managing director Mike Bayley suggested some unique locations Singaporean investors can consider.

‘For personal investment and for use as holiday homes, there are properties scattered throughout the country in locations ranging from islands, remote beaches and lakes through to snow-capped mountain lodges.’

He said most international investors are in the main cities of Auckland and Wellington, where there are large-scale residential investments.

In Queenstown, a small town by a picturesque lake surrounded by snow-capped mountains in South Island, Ms Charlesworth said an investor would need at least a NZ$250,000 (S$210,000) deposit for a managed apartment.

Such properties are rented out to visitors most of the year and are managed by a property company.

For a high-quality residential property, which is considered to have solid, predictable returns, at least NZ$450,000 would be needed.

More expensive residential investments generally require considerably less capital investment as a percentage of the total purchase price than managed apartments. This is because banks are more willing to offer loans for these types of properties.

Source: Straits Times, 26 April 2009