Will 2010 be the Year of the Renovation?
The media hasn't been this positive about the property market for years, but what can we really expect as a new decade kicks in?
Here are some examples of recent headlines:
1. House prices at 10-year high
2. Biggest influx of migrants since 2004
3. Leak law toughens in favour of buyers
4. Is the country facing another housing boom?
All the gloom and doom of the past two years seems suddenly to be just today's fish 'n chip paper. But what's behind all this good news? Will it last? We took a closer look.
Last year, Auckland, Wellington and Christchurch led a housing recovery that sparked a record national price. Real Estate Institute sale figures revealed that sales in November 2009 had pushed the national median to $355,000, which president Peter McDonald said set a record for the past 10 years.
But analysts were quick to point at that the low supply of houses was putting pressure on house prices and that, because of the low supply, the sales of a few higher-priced homes could have a strong influence on the "average" price. House price growth in the provinces was also lagging behind the main centres, but was predicted by at least one crystal-ball gazer to pick up in 2010.
What about immigration? Didn't positive net migration in the first half of this decade help to push up housing prices? So isn't the "biggest influx of migrants since 2004" likely to do the same?
Maybe. The reason for the positive net migration in 2004 was that there there were more people coming to New Zealand than people leaving. The reason in 2009 was that although there was actually a drop in migrants to New Zealand, there were a lot fewer people leaving.
So we'll just have to wait and see if the population increase from a lack of departures drives up house prices as much as a surfeit of arrivals.
The Government has just introduced new legislation to give home buyers greater protection from unwittingly buying leaky homes (see separate story). This has got to increase confidence and help to push up house prices, right?
Again, maybe. In response to a Government-commissioned survey released just before Christmas that estimated the cost to repair New Zealand's leaky buildings at more than $11 billion, Building and Construction Minister Maurice Williamson said that the damage was much larger than anyone had previously wanted to acknowledge. He announced a package to help affected homeowners repair their homes and move on, but until we know more about the package, it's impossible to say what affect it will have on the housing market.
So, is the country facing another housing boom?
Home owners are clearly still uncertain. They're not building new homes (the value of consents for the year ending November 2009 plummeted 28% from the year before and 41% from 2007) or plunging into the real estate market (monthly real estate sales are still well down on what they were five years ago).
But they are renovating their homes. For the past three years, the value of building consents for A&A (additions and alterations) has been at record levels, in complete contrast to the rest of the building industry.
It seems that most of us who are pretty happy where we're living believe that the smart money is on improving rather than moving. By putting in a new bathroom, kitchen or deck, or extending to get more space, we're getting the best of both worlds - increasing the quality of our lives as well as the value of our homes, at the same time taking advantage of current low interest rates.
Welcome to 2010: The Year of the Renovation.