Hello Everyone,

A property slump will hit the South Island over the next three years, but the North Island's cities will weather the downturn, says a report due out next month.


The Info metrics/PMI Residential Overview shows Auckland and Wellington will hold strong against property price falls, but values in Otego and Southland will slump by 2008.

The report, published every six months, gives detailed forecasts of construction activity, house sales and expected prices rises in each region.

Next month's report will say that overvalued rural property values will start to deflate as the expected increases in interest rates take effect.

But Wellington's solid government-driven economy is keeping the capital afloat. The city's values are forecast to bounce up from an expected 8 per cent rise by 2007 to a 15 per cent rise over the three years to 2008.

Auckland's population boom is also expected to soften pain in the commerce capital. Prices are picked to rise 15 per cent over the three years to 2008. Last year, the report was forecasting prices up 13 per cent by 2007.

While the cities keep their noses in front of inflation, Canterbury/Westland and Otego/Southland are forecast to fall 3 per cent and 4 per cent respectively.

Info metrics also says property prices will flatten nationally over the next 10 years.

The downturn is now predicted to come later than last year's report suggested when the slump was expected to kick in by the middle of this year.

Instead, economic naysayers were silenced by continued strength in the economy and an obsession with house ownership.

That prompted Reserve Bank Governor Alan Bollard to send a harsh message to New Zealanders this month, saying they were spending too much and could not expect high house prices to last.

Info metrics senior economist Gareth Kiernan said investors would be lucky to keep getting capital gains from their properties, although those in the luxury market tended to be cushioned from price fluctuations.

Many in the residential market who had made profits were getting out now.

"If they have been in the market five years they are doing well," he said. "It's the ones who got in six months ago who are not necessarily going to get capital gains."

Hello,

"It's the ones who got in six months ago who are not necessarily going to get capital gains."

Disagree!
Ok, you don't necessarily 'get' capital gains in 6 months if you are not going in a fast automatic price-rise period, BUT!!!! There are so many ways to create capital gains that if you are impatient you don't have to wait for time to make capital gains happen for you, you can make them happen.

If for example you get access before settlement and spend 5-10k on your 63k house before it even settles, you may be able to get a valuation for 92-95 when it's all fixed up, by the time you settled! Then you made 20k not even in 6 months, but sort of on 'day one' of owning the property!
By the way you were able to improve your rent from $120 t0 $180 in the process too, and remember you only borrowed 63k (73k with reno) so if you hold, then there's a 12 percent yield you just created out of a ten percent one that you bought, plus the 20k, not bad!???

it makes it more than cash flow positive on the whole amount including the reno, and you can go again straight away.

So you just keep on going in that fashion, you don't wait for the market!