TelferYoung (Nelson) Limited

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Nelson Newsletter - August 2009

24 August 2009

Welcome to our August 2009 edition of the TelferYoung Nelson Newsletter. In this issue we look at the Residential market.

We are constantly bombarded with conflicting ideas, reports and evidence on where the property market is today and where it will be in the future.  With the ever increasing information at our fingertips through the media, the web and market commentators, one could expect that it would be far easier than ever to make sense of the residential market.  In reality we all know that there are so many factors that play a part in the residential market that it is anything but simple.   With most of this information coming from the main centres it can be difficult to understand what is happening in our own local market.

Nelson is a location with a great variety of property types falling within a wide value range.  Different areas of this market have different drivers.  Buyer motivation in the differing market sectors can be quite different at any one time.  In general the residential market is affected by housing affordability, current employment opportunities, interest rates, supply of housing and migration.  Any one of these can have an effect on the market, let alone the emotional tie that many have to their residential property.  Nelson has its own distinct residential market with its own drivers. 

So where is the Nelson residential market at today?  Is there any rhyme or reason those in the market can follow to ensure they get a fair deal when purchasing or selling property? 

It is our view the Nelson residential market is holding up well in these turbulent times, particularly in the mid price band where there are the greatest number of buyers.  However, it would appear the upper price bracket is not holding as well, as the market has limited active buyers.

To determine how the current market is performing we have searched Nelson and Richmond sales in 2009 that have their prior sale occurring within the last 2 years.  These resales give reassurance that our market is still holding or is slightly down overall.  In our view the few sales which show a greater fall in the market are not indicative of the entire market.

Resale Facts

• Volume of resales in 2009 = 95
• Price range variance -35% to +26%
• Price reduction 10% or more = 4
• Price reduction 5% to 10% = 10
• Price variation -/+ 5% = 62
• Price increase 5% to 10% = 10
• Price increase 10% or more = 9

Those with the greatest negative sale price change can be explained by mortgagee sales, poorly located properties or poorly presented properties.

Those with the greatest positive sale price change are more than likely properties which have had some improvements made to increase their value.  Other reasons include the prior sale being forced or below market levels.

The greatest proportion of resales fall within 5% of their prior sale price, suggesting the market is holding comparatively well at this point.

Reasons for our market holding include the fact we do not have a great surplus of housing stock available on the market but rather the contrary, with agents reporting a shortage of listings.  With decreased interest rates and slight reductions in value, those first home buyers who can get a deposit together are finding greater affordability.   'Mum and Dad' investors, or baby boomers with a mortgage free house see greater returns in residential rental property when compared to interest rates in the bank and are therefore looking to purchase rental properties within the lower to middle price bracket.  This coupled with limited vacant land for development and long time Nelson property investors holding firm on values, leaves bargain hunters looking long and hard before they find the deal of the moment.

Yes, there are examples of property which appear cheap or a bargain however these properties are generally less desirable and within a sector of the market where there is less demand.

With hugely reduced sale volumes in early 2009 some suggested that values would sharply fall ... and to some extent there have been some bargains snapped up but more realistically most sales suggest only a slight correction within our market.  March dwelling sales volumes were up with 109 sales within Nelson city compared to 68 and 86 for January and February respectively.  This was in response to lower interest rates which saw residential investors looking to secure residential investment property as bank deposit rates fell.  Over the last three months sales volumes have softened slightly to 75, 91 and 77 per month respectively. 

One major change is the vacant section selling activity with January to April seeing 3 to 5 sales per month increasing sharply to 13 and 14 in May and June.  This is generally due to a renewed positive outlook, slight reduction in section values, lower interest rates and with builders' workloads low, a perception the cost of building has reduced.

So we currently have a market with active buyers seeking well presented properties, where greatest demand is for the typical family home within the middle price bracket.  Of those properties that have sold twice in the last 2 years the majority are within 5% of their prior sale price confirming values are holding well at this point.  Those properties which are marketed at ambitious price levels or have undesirable characteristics, be it condition, location or property type, are more likely to meet market resistance, as today's buyer is well informed and will shy away from any ‘marginal' purchase.

Valuer Profile:     Ashley Stevens

 Registered Valuer

Ashley completed a Bachelor of Business Studies majoring in Valuation & Property Management at Massey University.  He moved to Nelson in 2005.

Ashley has 4 years experience in commercial, industrial and residential property valuation and consultancy.  Working with our Registered Valuers pre-registration he gained an understanding of all property valuation and now being registered, he specialises in residential and industrial valuations and consultancy.

He works across all residential assignments and all value ranges from Atawhai through the central city to the Stoke border. His industrial coverage includes the Stoke and Tahunanui areas.

Ashley has a keen interest in both new building projects and residential investment, having worked many years in a family building company and having owned residential investment property.  This experience gives Ashley the knowledge and skills to understand client requirements in these areas.

Ashley is a keen mountain biker and competitive squash player and has fully immersed himself in the lifestyle opportunities Nelson provides.

Back issues of the newsletter can be obtained from TelferYoung (Nelson) Ltd
Phone (03) 546-9600
Fax (03) 546-9186
www.telferyoung.com
email: nelson@telferyoung.com

+ Ian McKeage + Rod Baxendine + Bryan Paul + Ashley Stevens + Wayne Wootton