The Reserve Bank of New Zealand today dropped the OCR from 8.25% to 8%.
No-one is really expecting this to effect mortgage rates in the short term however DR. Bollar dfid indicate that further cuts may be sooner rather than later.
A lot will depend on the NZ Dollar movement, if it slips too far then this may negate further cuts. Time will tell.
Most of the central banks around the world have the same problem, inflation heading upwards and high interest rates. It will be interesting to see how the NZ strategy works.
Home values are still slipping and fuel prices remain high but we appear to have topped the peak on West Texas Crude but the $20 a barrel drop has not really een reflected fully at the petrol pumps. Most economists expect fuel prices to drop even further as speculation on oil appears to be waining.
Still not a good time to buy your residential investment property, the freezing or payouts from the Hanover group (One of larger finance companies in New Zealand)reflects the problem in the investment market as many developers find it harder and harder to attract buyers in what was traditionally the primary markets like Queenstown.
Home owners are not looking to sell at this time but are taking the rental market option, this is putting extra strain on the current landlords as more and more vacant property hits the market. This will result in lower rentals.
We still believe that you should avoid investment property sales consultants at this time and do your own thing, this will save you many thousands of dollars which can be spent on property improvements that will attract tenants who are an increasing property portfolio to select from.
Summary: - Current market in New Zealand is still recessive.
1. Falling house prices.
2. Finance companies still struggle to find investment capital.
3. Developers struggle to find buyers.
4. High mortgage interest rates.
5. High fuel prices.
6. Inflation trending towards 5%+
7. Labour market gathering momentum for wage increases to cover rising costs.
Home owners should look to refinance with financially efficient mortgages (FEM's) and ensure they take every benefit to reduce the debt costs.
Latest opinions appear to be saying that we can expect another 12 months of this but that is still crystal ball gazing and in reality we do not believe anyone knows what will happen next.
Remember we still have good quality water, a great environment and summer is not that far off. Our lakes are filling nicely with water so power cuts seem remote. All in all NZ is a great place to live and I think the reserve bank will do its best as usual.
The above represents the opinion of IMS Financial Services, information and views are based on general news and bank issued newsletters from their various economists. We are mortgage brokers and not economists and you should not rely on our opinions when making financial decisions. Always seek expert advice unless of course you want to talk about mortgages and we can do that.
NZMBA Registered Brokers
Financial Services for New Zealand
Wednesday, July 23, 2008
Sunday, July 20, 2008
FEM mortgages become popular as times get hard
With many households struggling as a result of high interest rates, high fuel costs and rising inflation FEM mortgages are becoming even more popular.
FEM or Financial Efficient Mortgages offer some serious advantages over traditional mortgage porducts whilst retaining the traditional safety of a principal and interest loan (the ones you always pay off).
They still have the ability to have several fixed and floating rate options ensuring you can pick and choose the best rates that your crystal ball can provide.
The really effectiveness comes from the additional savings made as a result of the no cost or no fee structures. (unlike some offers these are not limited to a certain balance that has to be maintained either. They have no fixing fees, no bank fees, no statement fees, free direct debit and auto payment loading, all done through their 24 hour internet banking service. You get an eftpos card and can shop around for the best credit card offer with any bank you choose (If you really want a credit card).
No wonder they are so popular.
Simply mixing the bank and mortgage account uses the power of your unspent money (groceries, monthly bills even the mortgage money) to save interest until you spend the cash.
Gone are the old fashioned and dangerous revolving lines of credit, with the FEM loans all you can do is be better off.
Have you got a FEM loan?
If your mortgage pays off faster when you pay fortnightly - sorry but NO.
If you have a revolving line of credit - sorry but NO.
If you pay fixing fees, account fees or have to have a minumum debt balance for zero fees - sorry but NO.
If you have paid someone to arrange the loan for you? you may well have but you have also been ripped off.
I am happy to report that such mortgages have been around a number of years and have proven themselves as solid result generators with some borrowers cutting their mortgage repayment time in half.
The really magnificent thing about FEM mortgages is that you can build up savings in the good times and draw on them in the bad times, well at least for as long as you have a mortgage.
Want to know more about mortgage types - CLICK HERE
FEM or Financial Efficient Mortgages offer some serious advantages over traditional mortgage porducts whilst retaining the traditional safety of a principal and interest loan (the ones you always pay off).
They still have the ability to have several fixed and floating rate options ensuring you can pick and choose the best rates that your crystal ball can provide.
The really effectiveness comes from the additional savings made as a result of the no cost or no fee structures. (unlike some offers these are not limited to a certain balance that has to be maintained either. They have no fixing fees, no bank fees, no statement fees, free direct debit and auto payment loading, all done through their 24 hour internet banking service. You get an eftpos card and can shop around for the best credit card offer with any bank you choose (If you really want a credit card).
No wonder they are so popular.
Simply mixing the bank and mortgage account uses the power of your unspent money (groceries, monthly bills even the mortgage money) to save interest until you spend the cash.
Gone are the old fashioned and dangerous revolving lines of credit, with the FEM loans all you can do is be better off.
Have you got a FEM loan?
If your mortgage pays off faster when you pay fortnightly - sorry but NO.
If you have a revolving line of credit - sorry but NO.
If you pay fixing fees, account fees or have to have a minumum debt balance for zero fees - sorry but NO.
If you have paid someone to arrange the loan for you? you may well have but you have also been ripped off.
I am happy to report that such mortgages have been around a number of years and have proven themselves as solid result generators with some borrowers cutting their mortgage repayment time in half.
The really magnificent thing about FEM mortgages is that you can build up savings in the good times and draw on them in the bad times, well at least for as long as you have a mortgage.
Want to know more about mortgage types - CLICK HERE
Saturday, July 19, 2008
Avoid Rental Investment Property Consultants
This is not the time to get yourself involved with these companies. With the housing market experiencing falling prices you are simply going to put yourself behind for many years.
These companies will heap on charges and profit from the buy/sell and arrangement of services that in all honesty youcan do yourself.
Before you buy check out the real price of similar units on the Internet - you will save yourself thousands of dollars.
Use your own valuer never use a valuer appointment or recommended by investment property consultants, worse still never ever let them arrange a valuation for you.
You do not need to be an expert to do this yourself:
Look for a property in or around the city centre or local hospital, make sure it is 2or 3 bedroom, has parking, then redecorate the walls in neutral colours, fit a new kitchen (Granit or Marble tops, new appliances, modern light fittings, curtains, blinds and carpets. Tidy up the garden, put in a heat pump if missing and hey presto you have a property that will command good rental income.
Start by getting quotes for all of this work.
1. Get a free interview with a quality chartered accountancy firm and ask them if you need to form an LAQC, if the answer is yes get a quote from them to do the job.
Ask them for a price to complete and submit your IR23B claim form.
2. Order your own valuation and ask for a depreciation schedule at the same time. Remember you want a valuation as is and as renovated (as per your quotes)
3. Arrange your own property and landlords protection insurance - remember if it is part of a body corp then the body corp normally arranges the building insurance.
4. Get a free rental appraisal from a rental agency on an as renovations completed basis.
5. Use an independant broker or go to your own bank for the finance.
6. Get your own solicitor for the mortgage paperwork and get a quote or ask your mortgage broker/banker to recommend a good competitive solicitor.
7. If the vendor is a developer and it is a new unit then see if they will include 12 or 24 months rental guarantee.
Remember a consultancy firm will usually obtain a $20,000 discount from such vendors just to market them to suckers who use their services. The clients do not get the discount the consultants keep that. This is where your negotiating powers come into play, get the discount yourself, develpers always need to sell to move on to the next project.
These companies will heap on charges and profit from the buy/sell and arrangement of services that in all honesty youcan do yourself.
Before you buy check out the real price of similar units on the Internet - you will save yourself thousands of dollars.
Use your own valuer never use a valuer appointment or recommended by investment property consultants, worse still never ever let them arrange a valuation for you.
You do not need to be an expert to do this yourself:
Look for a property in or around the city centre or local hospital, make sure it is 2or 3 bedroom, has parking, then redecorate the walls in neutral colours, fit a new kitchen (Granit or Marble tops, new appliances, modern light fittings, curtains, blinds and carpets. Tidy up the garden, put in a heat pump if missing and hey presto you have a property that will command good rental income.
Start by getting quotes for all of this work.
1. Get a free interview with a quality chartered accountancy firm and ask them if you need to form an LAQC, if the answer is yes get a quote from them to do the job.
Ask them for a price to complete and submit your IR23B claim form.
2. Order your own valuation and ask for a depreciation schedule at the same time. Remember you want a valuation as is and as renovated (as per your quotes)
3. Arrange your own property and landlords protection insurance - remember if it is part of a body corp then the body corp normally arranges the building insurance.
4. Get a free rental appraisal from a rental agency on an as renovations completed basis.
5. Use an independant broker or go to your own bank for the finance.
6. Get your own solicitor for the mortgage paperwork and get a quote or ask your mortgage broker/banker to recommend a good competitive solicitor.
7. If the vendor is a developer and it is a new unit then see if they will include 12 or 24 months rental guarantee.
Remember a consultancy firm will usually obtain a $20,000 discount from such vendors just to market them to suckers who use their services. The clients do not get the discount the consultants keep that. This is where your negotiating powers come into play, get the discount yourself, develpers always need to sell to move on to the next project.
Our Current Recommended Survival Strategy
1. Identify all high cost short term debt and consolidate into your mortgage account up to 90% loan to current value.
2. Obtain a financial efficient mortgage (FEM) (Bank account and mortgage account is the same with zero bank fees - including zero fixing fees)
3. Run all income through the mortgage account to save interest until you spend the money.
4. If your saving plan does not return a greater net percentage (after tax and fees) than the cost of the mortgage put your savings into your mortgage.
5. Use short term fixed rates to get rate advantage but mix them and identify the right amounts to fix for each period. (have a mortgage analysis undertaken)
6. Keep your eye on the fixed rate movements this will give you an idea on how the banks expect the rates to perform over the next 5 years.
7. Do not be tempted to hit the credit cards and buy on HP, with tough times the retail offers can be hard to resist.
In a recessive market what you owe is far more important than what you own.
2. Obtain a financial efficient mortgage (FEM) (Bank account and mortgage account is the same with zero bank fees - including zero fixing fees)
3. Run all income through the mortgage account to save interest until you spend the money.
4. If your saving plan does not return a greater net percentage (after tax and fees) than the cost of the mortgage put your savings into your mortgage.
5. Use short term fixed rates to get rate advantage but mix them and identify the right amounts to fix for each period. (have a mortgage analysis undertaken)
6. Keep your eye on the fixed rate movements this will give you an idea on how the banks expect the rates to perform over the next 5 years.
7. Do not be tempted to hit the credit cards and buy on HP, with tough times the retail offers can be hard to resist.
In a recessive market what you owe is far more important than what you own.
Our NZ Residential Property Market Opinion
IMS strongly believes that it is NOT currently the time to buy property, even residential investment property should be avoided as more and more rental properties arrive on the market. Those not able to sell are keep hold and placing their properties For Let. Those who continue to look for investment property should ensure they avoid specialist companies offering full packages. Such companies are renown for hiking prices to get a good profit margin and in a recessive property market these can produce a serious disadvantage for the property buyer.
IMS advises client to retain property if possible and weather the storm, refinancing and debt consolidation is the key to an asset building strategy using financial efficient mortgage products, zero bank fees and delayed payment via credit card usage. Where possible avoid revolving credit, the best mortgage products offer all the same advantages but within a safe principal and interest loan.
IMS advises client to retain property if possible and weather the storm, refinancing and debt consolidation is the key to an asset building strategy using financial efficient mortgage products, zero bank fees and delayed payment via credit card usage. Where possible avoid revolving credit, the best mortgage products offer all the same advantages but within a safe principal and interest loan.
Saturday, July 12, 2008
REINZ June 08 Report
Property Market Decline Continues in June - REINZ
11 Jul 2008
The decline in the residential property market in New Zealand increased in June with Auckland, Wellington and a number of other provinces showing the biggest decreases, according to the Real Estate Institute of New Zealand (Inc).
Sales were down again, from 4,372 in May to 4,305 in June and it now takes nearly two months to sell the average property, with days to sell up from 49 days in May to 53 in June, according to REINZ National President Mr Murray Cleland.
“The market trend is consistent with the current environment and other key economic indicators, and as with the latest business confidence statistics, there isn’t a lot of confidence in the residential property market at present.”
Mr Cleland said that winter was always a quiet period for real estate, but sales in June had hit a new low; more than 3,000 transactions lower than the June 2007 figure of 7,474 sales.
“However in relative terms the decline is pretty gradual and probably not as pronounced as predicted by some commentators. The market is finding its own level quite well and there is certainly no indication of any significant slump in values.”
“People are generally deciding to stay put and deferring decisions on buying and selling until a clearer trend emerges. Where values are weaker, the explanation is often that people are selling because they are on employment transfer and our agents report that price expectations are having to be lowered to facilitate faster sales.
“However, at the current rate of easing in prices, there is a possibility that the market may bottom out in the next couple of months and then rally a little in spring.”
The lower end of the property market was relatively liquid, which contributed to the national median price falling from $345,000 in May to $340,000 in June.
Sales of properties under $400,000 were up slightly from 2,680 in May to 2,708 in June, but sales of properties valued at between $400,000 and $599,999 were down from 1,041 in May to 1,039 and properties between $600,000 and $999,999 were down from 508to 427.
Sales of properties worth $1 million and over were down from 143 to 131.
The national median price is now 2.15 per cent lower than the figure for June 2007 of $347,500 with the biggest regional decline being recorded by Manawatu and Wanganui down 13.81 per cent from $248,000 to $213,750.
Auckland and Wellington were close to the national average decrease at 2.24 per cent and 2.26 percent respectively; while Central Otago Lakes District was the exception, trading at 22.38 per cent higher than a year ago.
The Auckland median price was down from $447,500 to $435,000, with the Metropolitan Auckland median down from $451,000 to $440,000.
Wellington was similarly affected, down from $389,500 in May to $366,500 in June.
Provinces showing the most marked declines in median prices included Northland down from $310,000 in May to l$302,750 in June, Manawatu and Wanganui down from $224,500 in May to $213,750 in June, Otago down from $240,000 in May to $225,000 in June and Southland which was down from $200,000 to $182,500 in June.
However three regions recorded increased medians, including Waikato and Bay of Plenty up from $310,000 to $316,000.
This was despite a fall in the Hamilton City median from; $337,500 to $323,000, and a drop in the Tauranga median from $376,500 to $363,000.
However pushing the district median up were Mount Maunganui and Papamoa up from $395,500 to $398,000 and Gisborne City up from $200,000 to $220,000.
Hawkes Bay was down from $265,000 to $261,000, and Taranaki dipped from $285,000 to $255,000, however Canterbury and Westland went against the trend with their median up slightly from $296,000 to $299,000.
11 Jul 2008
The decline in the residential property market in New Zealand increased in June with Auckland, Wellington and a number of other provinces showing the biggest decreases, according to the Real Estate Institute of New Zealand (Inc).
Sales were down again, from 4,372 in May to 4,305 in June and it now takes nearly two months to sell the average property, with days to sell up from 49 days in May to 53 in June, according to REINZ National President Mr Murray Cleland.
“The market trend is consistent with the current environment and other key economic indicators, and as with the latest business confidence statistics, there isn’t a lot of confidence in the residential property market at present.”
Mr Cleland said that winter was always a quiet period for real estate, but sales in June had hit a new low; more than 3,000 transactions lower than the June 2007 figure of 7,474 sales.
“However in relative terms the decline is pretty gradual and probably not as pronounced as predicted by some commentators. The market is finding its own level quite well and there is certainly no indication of any significant slump in values.”
“People are generally deciding to stay put and deferring decisions on buying and selling until a clearer trend emerges. Where values are weaker, the explanation is often that people are selling because they are on employment transfer and our agents report that price expectations are having to be lowered to facilitate faster sales.
“However, at the current rate of easing in prices, there is a possibility that the market may bottom out in the next couple of months and then rally a little in spring.”
The lower end of the property market was relatively liquid, which contributed to the national median price falling from $345,000 in May to $340,000 in June.
Sales of properties under $400,000 were up slightly from 2,680 in May to 2,708 in June, but sales of properties valued at between $400,000 and $599,999 were down from 1,041 in May to 1,039 and properties between $600,000 and $999,999 were down from 508to 427.
Sales of properties worth $1 million and over were down from 143 to 131.
The national median price is now 2.15 per cent lower than the figure for June 2007 of $347,500 with the biggest regional decline being recorded by Manawatu and Wanganui down 13.81 per cent from $248,000 to $213,750.
Auckland and Wellington were close to the national average decrease at 2.24 per cent and 2.26 percent respectively; while Central Otago Lakes District was the exception, trading at 22.38 per cent higher than a year ago.
The Auckland median price was down from $447,500 to $435,000, with the Metropolitan Auckland median down from $451,000 to $440,000.
Wellington was similarly affected, down from $389,500 in May to $366,500 in June.
Provinces showing the most marked declines in median prices included Northland down from $310,000 in May to l$302,750 in June, Manawatu and Wanganui down from $224,500 in May to $213,750 in June, Otago down from $240,000 in May to $225,000 in June and Southland which was down from $200,000 to $182,500 in June.
However three regions recorded increased medians, including Waikato and Bay of Plenty up from $310,000 to $316,000.
This was despite a fall in the Hamilton City median from; $337,500 to $323,000, and a drop in the Tauranga median from $376,500 to $363,000.
However pushing the district median up were Mount Maunganui and Papamoa up from $395,500 to $398,000 and Gisborne City up from $200,000 to $220,000.
Hawkes Bay was down from $265,000 to $261,000, and Taranaki dipped from $285,000 to $255,000, however Canterbury and Westland went against the trend with their median up slightly from $296,000 to $299,000.
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