The cautious approach

There is no question that buyers are taking a cautious approach. Auctions are interesting, by and large buyers have decided to stand back and not bid – once the auctioneer has declared the property as having not met reserve,one of two scenarios play out, either:

a) Buyers then bid aggressively for the first right to negotiate or
b) The property is passed in without a bid at which time multiple offers are received.

The interesting thing is that in this situation, buyers complain of not wanting to be in a ‘Dutch auction’ – go figure! Either way, the Auction process we are using is proving a very efficient way of finding the best price available to the vendor, as a consequence, we are seeing satisfying results for our vendors.

Daylight saving ends

Daylight saving ends this weekend and with it those long lazy twilights – we’ve been spoilt in what has felt like an Indian summer.
The Deutsche Bank/UBS result of billion dollar losses continues to demonstrate the fragility of the international banking sector. I suppose many will be pleased to have seen the end of the financial year. The question now is how will the 2008 year shape up? For us anyway we have enjoyed a great result in spite of some uncertainties, I guess that is the benefit of serving buyers and sellers in Auckland’s preferred suburbs.

Meaningful long term decisions

There is no doubt there is a degree of difficulty in making meaningful long term decisions in the current property market when faced with a daily barrage of negative media information, most of which is speculative.

The only available facts are historical. As they say, hindsight is a wonderful thing. Without stating the obvious, some basics must surely come in to play in making wise purchase decisions like;

1. Can I afford this?
2. Is this a home that works for me? (I love it!)
3. Do I intend to hold this for the medium/long term?

If the answer to these question is yes – history would demonstrate the purchase will add to your life personally and financially.

The ability to move forward in a purchase decision most often relates to confidence. Doing the homework is one thing – the ability to stand back from the noise of many voices and make a wise decision can be another. Sales numbers are down, and yet as the saying goes, the time to buy is when no one else is. Great in theory for some, harder in practice. We note with interest, that generally buyers would prefer to pay more in a heated market, proving one thing – the buying decision is essentially a feeling.

Recession?

Troubled financial times in the US continue with the Bears Sterns collapse. It seems as though each week there are ripple effects as a result of either: bleak stories from the subprime market, international share market woes, the demise of the local finance industry and more recently our own share market diving. So the question remains, where do you put your money? Where is the safe haven? Well, that’s the great thing about a home. Good times and bad, it’s never worth nothing. You can always rent it and it gives you somewhere to live. More particularly it provides a haven and security in troubled times. It’s interesting that whenever you want to raise money, the first thing any lender wants is some real estate as security for the loan.

We note with interest economist Tony Alexanders reaction to Cullens recession reference:

Recession? Not as we know it Captain. Forget the panic merchants and have
a Happy Easter.

Media headlines this week have focused on the near 50% probability (toss of
a coin in other words) that we may see a minor technical recession late
this year - though the data to judge whether this happens won't appear
until April 2009. But a true Kiwi recession means sharply rising
unemployment and that will not happen this cycle. That means declines in
retailing and even housing will be capped to some degree. History shows
that less panicky businesspeople and investors can make their best deals at
times when other people are headline-focused and predicting doom. So for
all those cashed up property investors waiting for better yields, purchase
time is approaching this Winter. For those companies seeking better
qualified staff hiring opportunities will soon be appearing. And for
businesses wanting better premises some will also become available soon as
under-capitalised inexperienced operators get scared into down.

In other words, this year and next year will provide a very good
environment where New Zealand's' recent appalling productivity growth
record can be reversed with resources moving from inefficient areas to
businesses struggling to get people and premises to expand. The big winners
will eventually be exporters still now in business after five years of an
over-valued exchange rate with the NZD set to decline later this year.

Our message to the nervous is don't panic. Its still fundamentally a soft
landing being talked about.

Internationally its been a week of major downs then an up with the collapse
of US investment bank Bear Sterns driving a surge in fears about other
banks. But a 0.75% rate cut in the US last night and better than expected
profit reports from two large investment banks has assuaged those concerns
somewhat - for now. But downside risks still prevail internationally and
huge volatility in exchange rates, sharemarkets, and perhaps interest rates
remains likely this year. Buckle in.

Sellers market, or buyers market?

It’s becoming very obvious that the market has become softer. There is no question homeowners have become more realistic in their expectations, resulting in some wonderful opportunities. The thing that is surprising is that buyers are not pursuing these opportunities more aggressively – if it’s not a sellers market, it must be a buyers market.