2010 Summary

2010 MARKET REPORT

The 2010 year started optimistically for the real estate industry. Whilst January was slow and volume was lower than normal, February and March picked up nicely with good volume. In the subsequent months the volume settled back down to an average of around 150 house sales per month – which was less than the 2009 performance and in line with the 2008 year following the credit crunch. The market was steady and relatively stable.

The cause of the downturn in the property market has its roots in the June 2010 budget. This has not been kind to investors who choose property as their investment vehicle. The government has increased taxes for investment property owners from April 2011. They have removed the ability to depreciate the assets and changed the way LAQC’s operate – the result is approximately a 12% tax increase causing many investors who have carefully planned an investment portfolio cost increases and delays in the rate of return on their investments. In order to make up this difference rents will need to rise by about 18% - which may take another year or two

The result in Hamilton has been a dramatic reduction in new builds, a downward trend in house prices of around 3%, a reduction in section prices and low sales volumes of investment properties. The demand from buyers in investments is for a 10% return in many cases – although 8% is a more realistic level.

The economy has not performed quite the way it was intended with the June Budget tax changes. Most people chose to hold off investing and to reduce spending – this is not surprising given the performance of the financial markets in New Zealand. Generally people who want to invest in property chose to pay down debt and increase savings in order to have better deposits when they do buy.

What lies in store for the Hamilton property market in 2011?

I believe that the sales volume will be similar to those seen in 2010 (see the tables below). The price levels however are very sensitive to the condition and presentation of the property and this will continue to be the case.

For many this is a good market - if you are buying in the same market as you are selling there is no disadvantage. There are good opportunities for people wishing to build new houses – section prices are more affordable and there are many builders who will give excellent deals on new housing – from $1000 per square metre – 1996 prices!!

In a flat market there are also many opportunities for investors and cashed up buyers - particularly those that have the 20% deposit in cash. If you are interested in selling – the first quarter of this year would be a good time. Contact me if you are interested.

Graph showing monthly house sales volume of around 150 per month in 2010

Table showing an average 3.3% drop in house prices in 2010

Table of sales by suburb and the average price in each suburb in 2010