The Reserve Bank left the OCR unchanged at 2.5 percent

Back in the 1980s, inner city Auckland, outside working hours and before seven day trading, was pretty much a ghost town. People worked in the city but all lived outside it. In 1991 there were 1,200 people living in the CBD – now there is over ten times this number. We expect continued growth, particularly when the Wynyard Quarter is developed. Most of the people choosing to live in the city, tend to be younger, mobile and childless, but this likely to change. Older people, once their children have left home, are also starting look at this market. Inner city living is ideal for those that travel a lot, as it is much easier to lock up an apartment on the sixth floor and leave it, compared with a house in the suburbs. As a result apartments will become an increasingly important part of our overall housing stock.

Australia, last week, lowered its overnight cash rate and mortgage decreases followed. Our Reserve Bank has stated that our exchange rate is too high, our Government will not meet their fiscal targets, inflation is subdued and our unemployment is slowly rising. As we have stated previously, our Reserve Bank should decrease interest rates further, which would assist those with mortgages, as well as the export sector via a lower exchange rate. This is unlikely to ignite the housing market. A small portion of the market is active and appreciating, but this is confined to the inner Auckland suburbs.  The rest of the country can only be described as stable. Christchurch is a bit of an exception. Let’s hope our Reserve Bank follows their Australian counterpart.

Last week the overnight cash rate in Australia was reduced from 4.25% to 3.75% because of the slowing economy. Mortgage rates have fallen as a result. Earlier this week Australia released their Budget which gave some benefits to the average Australian. The Treasurer said he was passing on some of the gains from the mining boom. Company superannuation contributions were increased to 12% and there are tax decreases for incomes up to $80,000. Our Budget will be presented later this month – it is unlikely to pass on any benefits to the average consumer. What we need here is some radical economic reforms just to keep up with Australia. A relatively positive Budget across the Tasman and a negative one here will do nothing to stop those Kiwis from moving across the ditch.

There are still a number of borrowers who would like to purchase a property, and who may have a reasonable deposit, but to whom the main stream lenders are saying no. The reasons are often due to credit issues or difficulty in substantiating income levels. A solution is to come to us and we can provide bridging finance for a year or two, to enable the borrowers to tidy up their financial affairs and prior to refinancing on to a main stream lender. This is a good solution, as it enables the borrower to purchase the property they want to now, and to get on with their lives.

Interest rates are at lows not seen since the early 1970s. Rents, particularly in the major cities, are high and are continuing to rise. In many cases, it costs now roughly the same to own a property as it does to rent it. If your income is relatively secure, this is now the time to consider owning your own property. Mortgage rates are low, but if you are worried about them rising and making it harder to meet your repayments, it is now easy to fix them and protect yourself. Many renters complain about the quality of their accommodation. By owning, you can steadily improve your property and this may be reflected, over time, in an increase to the capital values.

Mortgage Express sets its roots in Taupo, with the appointment of Lea Martindale as mortgage broker and insurance advisor last week.

With a working career of over 30 years in the financial industry, including experience in specialist positions within major trading banks and as an independent broker, Lea has a breadth of knowledge.

Lea’s previous experience will be instrumental in developing client/advisor relationships, says Tony Hay, business owner of Harcourts Taupo Realty Services, “Having a very experienced person on hand to which customers have immediate access when making a property decision will be hugely beneficial.”

“Lea is passionate about customer service, a quality which will be key in building client relationships and promoting the Harcourts and Mortgage Express brand within Taupo,” says Mr Hays.

Lea says it is all about the client, providing a service and educating them on the options that are out there says Lea Martindale, “My role is to enable clients to achieve part of the ‘kiwi dream’ and provide them with access to owning their very first home.”

“Put simply, I love the connection of people, no two are the same and neither are their circumstances or designs on the future. It’s really rewarding to have a connection and valued relationship, where you can deliver on some ones hopes and dreams,” says Lea who is relishing being back in Taupo.

Now permanently in Taupo after having mobile roles covering the greater Waikato and Bay of Plenty which saw her based out of Hamilton, Lea looks forward to contributing to the community both professionally and personally.

Mortgage Express has brokers situated throughout the country however, Lea is to be the first Mortgage Express broker based within the Taupo region. “It is fantastic to have someone on board who is dedicated to the Taupo region and who knows the local market” says Harcourts Taupo Business Owner, Tony Hay.

With two months of 2012 already passed we take the opportunity to reflect on the previous year and confirm the positive outlook we have for 2012.

During the first half of 2011 whilst lenders had liquidity they approached business and commercial lending with caution. This had a direct effect on the ability of businesses to expand or capitalise on new opportunities. This coupled with the flow on effect of the Christchurch earthquake certainly created an air of caution and nervousness for both borrowers and lenders.

The Christchurch earthquake had a nationwide effect on people’s appetite to consider new debt for business expansion and/or acquisition. We noted a significant decline in enquiry level within two weeks of the February 2011 earthquake and this continued for the majority of the year with the level increasing in the last 60 days of the year.

Over recent months we have seen an increase in people looking for funding. It is interesting to note particularly over the last 90 days, that we have noticed a significant increase in buyer activity in the accommodation sector. A combination of freeholds, leaseholds and management rights changing hands. Whilst the market has been particularly challenging for businesses in this sector, all properties/businesses where we have sourced funding for our clients have displayed a sound profitable historical trading history in what has been a challenging market.

It is our view that the interest rate market will remain stable for the balance of this year and whilst there are future rate increases predicted we would see these as a gradual process as demand increases. Like all, we feel the rebuild in Christchurch will obviously have a roll over effect to a lot of other business sectors throughout the country. The one area continuing to see challenges is that of sourcing development funding and we continue to stress to clients that it is essential to ensure all facets of a development project’s funding application are fully covered.

What we have noticed particularly in the trading bank sector is that if your bank declines your lending request it does not mean your proposal isn’t soundly based. We have a saying that all banks are not equal as whilst they may have similar lending guidelines they do have differing views on different industry sectors. So where one bank is not comfortable they may well decline your application despite your excellent track record and long banking history with them. A bank is a supplier to your business no matter what sector your business activity operates in and I am sure if one of your suppliers was not performing and affecting your business’s ability to earn a profit you would look for a new supplier that allowed you to go forward and capitalise on opportunities.

Some examples of recent bank funding sourced for clients where their own bank would not assist or the terms and conditions of assistance were unsatisfactory to the client.

- Restructure of a significant management rights operation which covered land, building and business entity – total funding requirement $2.million.

- $1.7 million refinance of a high value waterfront property which included interest servicing provision pending its future sell down.

- $600,000 for owner occupier to purchase own building where the borrower had limited historical servicing evidence.

- $700,000 for a preschool business which was in a growth phase however historic trading was not sufficient to support the debt servicing.

Outside the trading bank sector it is fair to say that following the demise of so many finance companies there is not the diversity of funding options available particularly for those seeking funding to start a new business or acquire an existing business. This also applies to the property sector requiring us all to be far more resourceful in obtaining that necessary funding. Certainly, professional assistance in preparing funding applications is a critical factor together with ensuring all aspects are reviewed from all angles.

We are also encouraged that new lenders are starting to appear particularly for business stock and working capital requirements. The interesting and pleasing factor of these new lenders is their general lending policy which sees security limited to the business being funded excluding the borrowers residence as collateral.

For more information: Telephone: 09 360 5252

Mobile: 0274 923 539

Email: alan@stratafunding.co.nz

Web: www.stratafunding.co.nz

With property prices continuing to rise and mortgage rates likely to stay low, some analysts are predicting the start of a housing market recovery in New Zealand. However, events in Europe continue to influence local conditions and slow sales across the country are continuing to cause frustration. Is this really a market recovery, or simply a false start buoyed by strong conditions in Auckland?

According to the latest Quotable Value (QV) report, overall house prices are now only 3 percent below the market peak of 2007, with many parts of Auckland comfortable above this level. The banks also seem to be getting more friendly, with increased loan applications and a more charitable attitude towards applicants. However, are price rises really enough to forecast the start of a recovery, especially given the struggling domestic economy and ongoing uncertainty in Europe?

When you take a close look at the national house price index released by QV, it becomes clear that strong growth in Auckland is helping to skew the national data. This index is based on sale prices against rating capital valuations, and gives a clear picture of price movement between 2007 and now. While the old Auckland City Council suburbs are up 4.4 percent, Wellington is down 5.1 percent, Hamilton is down 11 percent, and Rotorua is down 15.4 percent. In fact, Auckland is the only major North Island centre where prices are up in relation to the 2007 peak.

While we are still a long way from the heady days of late 2007 however, that doesn’t mean conditions are bad. In terms of movement over the last year, prices are on their way up in most places, with Rotorua and Taupo the only two North Island centres to experience a decline over the last 12 months. Sales volume and overall demand are nowhere near the same level as 2007 however, which is a big concern considering the low level of current interest rates and the relatively friendly banking conditions.

Economist Rodney Dickens is one person who finds it hard to believe the hype, saying this in a statement to the NZ herald: “Great returns are not achieved by buying unaffordable assets and housing market bubbles don’t start from a platform of unaffordable prices… I believe the unfolding increases in national and Auckland house prices will prove to be transitory rather than being the start of a sustained boom or bubble.”

Property prices continue to go up, leading to a renewed feeling of optimism in some quarters. However, it is still unreasonable to predict a market recovery in the face of low sales volume and international concerns. While price increases across the country are a good sign, and the market in Auckland looks especially robust, predictions of a recovery will be much more believable when higher prices are matched by higher demand.

Even in the toughest economic times, consumers are reluctant to reduce spending in some areas. People are much less likely to cut down on spending if doing so reduces social capital, a sociological concept that relates to self image and the value of social relations. While the household budget has always been a complex and fairly flexible system, it seems some categories of spending are much more elastic than others.

While the definition of social capital is rather vague, the concepts surrounding it share the core idea that all social networks have an intrinsic value to the people in them. While people spend money on goods and services for a variety of reasons, including basic survival, the relationship between household spending and social image seems to be an enduring one.

In a recent article published in the Australian, Bernard Salt reviewed consumer spending on household goods and clothing, looking at changes in the Household Expenditure Survey between 2003-04 and 2009-10. The item with the most growth was computer games, with this category growing by almost 400 percent within six years. There were a number of other categories that also experienced sharp rises, including baby goods, concert tickets, and internet charges.

According to Salt, many of these increases can be viewed in terms of social capital, with consumers more than happy to spend money if it has a positive effect on their social standing. New technology products and services are one area of the household budget where people are willing to expand, partly because things like the Internet and computer games have a big effect on how consumers define themselves and socialise with others.

In contrast, cuts in the household budget typically occur when cheaper and deferred options are available and cuts have no effect on social capital. “The trick for retailers is to understand the psychology of a consumer who happily spends on some categories but makes cuts to others,” said Salt, adding “a second pair of jeans can be postponed without any serious diminution of the consumer’s social capital, but not access to the internet.”

While traditional concepts such as ‘value for money’ continue to affect the flexibility of household budgets, it is interesting how entire categories of spending become more elastic when their reduction threatens to reduce social capital. Salt also mentions international travel as an important form of social capital, saying “A budget airline trip to Vietnam beats a caravan holiday to Coolangatta,” for Australian consumers.

The link between household spending and survival needs may be obvious, but there are also a number of social factors that influence how we spend our money. While tough times cause consumers to become frugal with some categories of spending, products that help us to define and project ourselves into the community are so important that we are willing to flex the internal boundaries of the household budget.

Mortgage Express shows growth within the Christchurch Region as two new mortgage brokers are announced this week. Tony Falloon joined Phoenix Real Estate Ltd at the end of January and Richard Allan is set to begin with Four Seasons Realty Ltd this week.

Both men have extensive backgrounds in financial advising and mortgage brokering and will make valuable additions to the mortgage express team says Marcus Williams, Mortgage Express CEO.

“Despite the recent challenges Christchurch has faced, it is pleasing to see that with the support of Harcourts we have been able to grow our team to assist more vendors and buyers. We know that buyers are facing additional challenges at the moment and due to our knowledge of the industry and real estate market, by using a Mortgage Express Broker we know they will be getting best advice. With the partnerships we have with a range of lenders, we can provide them with all the options to make informed decisions.”

Tony Falloon has over 10 years experience as a mortgage broker within the Christchurch region. in addition to running his own home loan franchise for the past 6 years, Tony’s wealth of knowledge in both brokering and financial services as well as his customer focused approach will make him a welcome addition to the Phoenix Real Estate Franchise.

Phoenix Real Estate Ltd Business Owner, Bruce Lindsay says Tony’s extensive background provides him with a breath of knowledge allowing him to assist the client in all manner of situations from investment to multimillion dollar property purchases. “Tony is an experienced broker who knows the market and business very well. He is a welcome addition to the team and it’s fantastic to have an in house person on board available to work closely with our agents and clients”.

Richard Allen also brings a solid wealth of knowledge to the table with 20 years experience in the banking and finance industry. Richard comes from working as an independent mortgage adviser and broker however he also has worked in areas such as commercial lending and risk insurance. Richard’s strong and diverse background will be a valuable addition to the Four Seasons Franchise, says Four Seasons Realty Business Owner Kevin McKay “His experience coupled with his firm belief in solid communication will be key to working with our agents to build cliental within the franchise.”

Mortgage Express has been in operation since 1998 and has a team of experienced brokers based all over New Zealand. With recent growth to the team in the Christchurch region, Mortgage Express brokers are now more equipped to assist vendors and buyers during this challenging period.