Black year for property?

Press, 10 February 1988, Page 57

Black year for property?

According to the latest issue of “Personal Investor” magazine, 1988 could be the worst year this decade for buying a house. Inflation is down, meaning that the value of your house will go up less rapidly, while interest rates remain high, meaning costly mortgages. Both the Reserve Bank and the D.F.C.’s senior market economist, Mr Craig Stobo, are quoted as advising against investment in residential property. But according to Mr Bob Davison, the Christchurch regional manager of Harcourts Real Estate, those comments are doing the investor an injustice, and markets are changing overnight. Mr Davison believes that Christchurch is not “in as big a hole” as the rest of the country. It did not experience the same meteoric rise in property values in 1987, with an increase 18.25

per cent.below the national increase to June 1987.

People, in Christchurch at least, seem to be confident that property values will continue to rise this year — and in the future.

Mr Davison said that Harcourt’s Christchurch branch are experiencing a record January. “We’re extremely optimistic about this year, and I think that attitude applies to Christchurch real estate in general, not just our company,” he, said.

At the moment, there are plenty of listings but.few buyers. Mr Davison predicts that this will soon change, and “the market will go mad.” He thinks many buyers are waiting for interest rates to drop by 1 or 2 per cent, and warns that if they wait much longer, they will no longer be able to afford the house they want.

Prices are about to increase dramatically. The main activity at present is coming from the "bottom end” of the market, while at the top end there is a deathly hush.

In answer to Mr Stobo’s comment that people should rent for a while and invest their money elsewhere, Mr Davison is incredulous.

“Rent is a waste. Very few people who can afford to buy will rent just so they can see their money grow in a bank.” Owning a home, it would seem, is part of the New Zealand way of life. The desire to do so overrules all market considerations. Mr Davison believes few people buy a house purely as an investment. -

Mr John Glue, of the D.F.C. in Christchurch, echoes this view. “New Zealanders will always want a house of their own,” he said.

While Mr Glue agrees with Mr Stobo’s comments, he added that he believes interest rates will follow inflation down — “and then there will be a lot of people out there buying houses, because they’ll be able to afford the repayments.”

According to Mr Stephen Collins, managing director of Harcourts Real Estate, who was also quoted in the “Personal Investor” article, “the only people to get burnt in property, are those who buy their first home at a peak in the market, have to sell for various reasons, and are not in a position to replace.”

He notes that if your house depreciates, you will also be able to replace it at a lower cost.

Mr Collins believes that if people do indeed turn to renting, then rents will rise and residential property will be in demand again.