New Zealand Projects International

There’s no question the housing market has recovered from the doldrums. For example:

Meanwhile the New Zealand Reserve Bank continues to highlight the risks of another residential property boom. In its six monthly Financial Stability report released last week, Governor Alan Bollard warned of the need to avoid a return to a “debt-fuelled” housing cycle. To read the 57 page report click here
or to read a summary from the NBR click here

In my view the housing market has stabilised and the chance of another boom like the last one is slim. The demand pushing prices is now from home owners who see a shortage of stock, rather than investors seeking minimal rental returns and relying on capital gain as the real return on their investment.

For a realistic comment about house prices I like BNZ economist Tony Alexander’s comments. In his BNZ Weekly Overview of 5 November, he says “The implications for house prices of what is happening in the housing market are as clear now as they have been for a year and a half. Specifically

1. The Reserve Bank have said they are determined to keep floating interest rates low until the second half of 2010. That means ongoing strong support for the housing market as borrowers are attracted by currently low financing costs.
2. There is no massive surge in house construction underway though a recovery is occurring. Construction remains near the lowest levels in four decades at a time when housing is already in shortening supply.
3. The net migration numbers continue to increase and are now in above average territory.
4. The ability of housing supply to recover strongly is going to be constrained first by a lack of finance for subdivisions, then by builders going across to Australia to take advantage of a strong building recovery there to handle a massive housing shortage.” Underline is mine.

He goes on to say “House prices are likely to keep rising but one should not be thinking in terms of a boom. In fact it pays to keep an ear open to the comments from the likes of the Finance Minister regarding the potential for some reform in the ability of property investors to offset losses against other income. No capital gains tax is coming, but given that it is looking more likely some other change will occur, property buyers should make sure they are purchasing for positive cash flow and not doing what so many did in the past and plan ongoing cash losses in the hope of long term strong capital gain.”

Well said Tony.  To read the article click here and go to page 11. As to the search for investments that give better returns than bank deposits, I’m starting to see some excellent opportunities in business and property as owners see joint ventures and equity participation as an alternative to obtaining debt finance in the midst of this lingering credit crunch.

These include opportunities to invest in a number of properties and industries.

The details of many of these are subject to signing a confidentiality agreement and some are only available to those who qualify as an ”eligible person”.

If you’re interested in discussing this type of investment opportunity give me a call.