Pent up demand

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I have heard quite a few stories in the last 2 weeks regarding property in Auckland. Fletcher’s building company has stopped all new construction until everything they have already built is sold. A major player in Auckland has listed 200 million dollars worth of his own property at a 20% discount because he thinks the market is going to stay bad and he is looking off shore.

Developers in particular are cancelling projects left right and centre adopting a wait and see attitude.

Well the good news is the longer they wait the more they will see prices go ballistic when they do recover. One developer who QS’d a project in Howick has been advised that material cost has increased his build price by nearly 30K per unit already and he hasn’t started yet!!
Our housing shortage is not going to go away because we are in a slump. In fact it will get worse as properties are not built and investors bail.

So we must keep things in perspective here. We are sticking our fingers in to stop a leak but behind it is a huge dam of demand that is only going to grow in strength. What we are enjoying in Oz at the moment and for the next 2 to 3 years is going to come to New Zealand. When the immigration flood gates are forced open you want to be owning plenty of property. In fact historically NZ is always around 2 years behind Oz so if that trend continues it is going to be gang busters here by 2011.

The other significant issue we face is that with Pioneer pulling out of NZ we basically have zero lo and no doc lending available. That will make it very difficult for lots of investors to buy more property. Smart ones will join me in OZ where we can get money and enjoy the growth there but this will only worsen the housing issue here. So eventually this lending will have to be reintroduced big time and it will of course coincide with a recovery. So one thing we can watch for is the re introduction of no doc and mezz funding. This will be a trigger to get buying if you aren’t already.

Look at that, an entire blog about property

Stay Safe Dean Letfus @ www.massiveaction.co.nz (AKA Dean Leftus @ www.massiveaction.co.nz)

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