Where are we in the Property Cycle

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The property market has slowed after the introduction of the 40/60 LVR rules. The effect is that deposit requirements have doubled for investors, which is a set back for most new investors. Leaving first home buyers and mature investors as the main buyers in the market place. The overseas investors are waiting to see what happens with the market, once they decide that there is still positive growth, they will jump bak in. As a new investor, this can be an opportune time to buy, if you can get the finance. Before the overseas investors jump back in.

A group of property investors I am apart of identified the opportunity as being the lower level of buyer competition. Leaving good deals to be found, if you can manage to buy under the new LVR rules. There are non bank lenders out there whom can still lend 80% on a house, but their funds are limited, so they can take their time in approving applications, and they will typically change about 2% more then the mainstream banks.  If this is the way you decide to go, a short term strategy would be best. After a year or two, I would refinance with a main stream leander.

The rule of thumb is that property doubles in value every 10 years. Based on that, we should be at the end of this cycle by 2018. However, in 2008, the last downturn in the cycle, we had an over supply and a high vacancy rate. At the moment we have high demand, and strong immigration. So this cycle might not “dip” so much, as “slow down”. In order to meet demand, Auckland council have put through the new unitary plan which opens up Auckland for high density housing. All the new stock already in the pipelines wont be complete for another 2 to 5 years, which is when we see the demand and supply balancing out again. Also all the builders are in Christchurch, the ones in Auckland are flat out in the outer Auckland areas. Leaving central Auckland suburbs with high demand and limited supply. So Im going to invest in Auckland areas like Mt Eden, Mt Albert, Sandringham, Ellerslie and so forth.

Following the global economy is a good idea. The global economy and the state of currency is something to keep an eye on, it seems to be a house of cards thats been stacked up too high… As other countries experience instability, Auckland could look more attractive to people who can afford to move here. Our primary industry should help us through any global issues. The most exposed industries would be the secondary industries whom process and manufacture primary resources. Also, It’s hard to tell what the 1% will do to manipulate things, so focus on yourself and make sure you are as secure as you can be.

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The property manager

Find out more at www.patrickrankin.co.nz

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