Real Estate News - NZ - Gisborne 'cushioned' as house prices drop

Lifestyle factors are expected to cushion Gisborne against the worst effects of the widely-predicted slump in property values, with weather cited as the main factor attracting people to the East Coast.

Real Estate Institute president Murray Cleland said this week property values could fall by more than 10 percent in the months ahead. BNZ economist Tony Alexander is putting the figure at nearly three times that amount, with the BNZ warning the Government against increasing the supply of houses when the market is diving.

A glut of unsold homes was one of the triggers to the US sub-prime mortgage debacle, the bank warned.

But Massey University professor in real estate analysis Bob Hargreaves says the property market is sounder on the East Coast, which had warmer weather.

"If you look at weather maps, most of the bad weather seems to come in from the west side of the country, so generally on the eastern side of the country you get more sunshine hours."

Likewise, property investor Olly Newland said Gisborne, Tauranga and Napier should remain "relatively unscathed" because of the farming sector.

Phillip Searle, president of the Real Estate Institute's Gisborne-Waikato-Bay of Plenty branch, conceded there had been a substantial slowdown in the local market but agreed with the view that lifestyle factors would soften the extent of it.

New Zealand was a wealthy country where people were looking at lifestyle factors when deciding where to live, rather than where work was based, said Mr Searle. Technology allowed people to live in Gisborne but work for companies based elsewhere.

Gisborne beaches, the weather and the slower pace of life were enticing factors and not likely to change.

Meteorologist Jim Salinger had said the dominant variety of wine in Gisborne would change from chardonnay to shiraz because of the warmer weather brought about by climate change.

AFP had reported that French winemakers could be threatened by the "New World" wines of Australia, California, Chile, Argentina, South Africa and New Zealand, who had the best climatic conditions.

Expatriates were returning to New Zealand with large amounts of foreign currency after their OE, said Mr Searle.

Many "savvy" young people were borrowing to buy houses and leaving their pounds offshore until the exchange rate suited them better.

The farming sector also contributed to relative market stability here because Gisborne produced "a lot of what the world wanted". Despite this, sales volumes had dropped and growth in median sale prices had slowed substantially, said Mr Searle.

Gisborne's median sales price reached a peak of $302,000 in July 2007, and had fluctuated since but in a generally lower direction to $268,500 in February.

Prices had still risen by 7.7 percent in the 12 months to January and by 5.5 percent in the 12 months to February, according to Quotable Value New Zealand.

But this growth compared poorly to price growth in excess of 20 percent in previous years. House sales had also slowed from 55 in January and 34 in February, from 67 and 59 in the same months last year, he said.

But Gisborne had always experienced more of a gentle cycle, without the great booms or sudden drops of larger centres.

There was no question the market had changed.

"Lower volume reflects that some vendors are not meeting the market.

"If you ever sell, you will sell at market price -- which is the price that somebody will pay you."

He has been involved in the industry for 25 years, including several buoyant times and slower periods. He views the current situation as "a more normal market".

"When you buy and sell in the same market, while you may get less for your property than hoped for, you will probably pay less for your next property than you thought," said Mr Searle.

Falling values could, however, undermine this approach for those who borrowed up to 95 percent of their homes.

Reports are already coming in of people having to repay banks the difference between the price they paid and the present value, as banks tighten up on their home lending policies.

Property Investors Federation president Andrew King predicts the slump will last no more than five years.

The next boom could be sparked by first-time homebuyers taking full advantage of KiwiSaver, probably in 2012.

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