KEY POINTS:
Times of recession see more homeowners forced out of the housing market _ but the downturn also presents opportunities for bullish investors with an eye to future capital-growth hot spots.
The next group of people who make their wealth in property will buy during this period _ just
as those who made money during the previous property cycle got in early, says Steve Tucker of property valuation company PropertyInDepth.
Industry professionals agree the residential market is driven by emotion and the impact of the media. But while some buyers may sit on their hands for a while, others will realise there are deals to be had now.
Tucker's firm is seeing some "crazy" prices being accepted in sales it analyses, with buyers getting bargains from those forced to sell.
He expects the availability of good stock on the market to increase, with homeowners coming off fixed interest rate terms and rising unemployment.
Not all properties will increase in value equally _ some will outperform the averages. Certain types of property have lasting appeal and attract continuous strong demand by owner-occupiers and tenants.
PropertyInDepth's Steve McNamara says this is a good time to buy property in the blue-chip suburbs of St Heliers, Kohimarama, Milford, Takapuna and Herne Bay, where values are less volatile, or at the other end of the spectrum in areas such as Clendon with a high proportion of investment property, where he says it's common to find values have plummeted 20 to 25 per cent in a year.
Nine months ago people were willing to buy investment property at a
5 or 6 per cent yield whether it was in a swanky or shabby suburb, which he says was "ridiculous" because yield reflects expected capital growth and cash flow, and the potential capital gain in outlying areas such as Ranui and Swanson was "way overcooked".
It's a "fantastic" time to be buying double sections with subdivision potential, McNamara says, with the vacant section market "dead in the water" and builders looking for work.
Peter Turner, of property investment strategists Catalyst2, agrees those who have the courage to invest in this market will be the ones who make the most money long-term. "There's never been _ in 40 or 50 years of property investing _ a better time than now to buy a property."
Areas such as Ponsonby, coastal North Shore and eastern suburbs hold their value, but he says they're not investment environments _ where investors are able to achieve positive cash flow through having bought at an affordable price with a sensible loan-to-value ratio so that the rental return services the mortgage.
Turner says many investment properties have dropped a great deal more than the Real Estate Institute's average figure _ making them more affordable. "You need to look behind the figures into each niche of the market and see what performance it has achieved."
Catalyst2's Tanya Kwazas has invested heavily in coastal Beachhaven, which she says is undervalued given the infrastructure that has been developed there. "In Australia that close to the water you're well into your million dollars." She also thinks Avondale offers a good price entry point given its proximity to the CBD.
Kwazas favours buying properties to which Housing New Zealand leases are attached. These generally guarantee rent for 10 years with rights of renewal for another five years.
They include freestanding homes in most suburbs and there are less than 10,000 households on the waiting list.
While sellers may presently outnumber buyers, Turner says surplus stock in the market will be absorbed in 12 months as building activity is so low and interest rates are falling.
Kwazas says there will be a "serious shortage" in 24 months because about 16,000 old homes need to be replaced each year and international crises drive more people to the "haven" of New Zealand as well.
Major Campbell Roberts, of the Salvation Army, says his organisation has identified a shortage of 2500 homes in Auckland. However, the New Zealand Property Investors' Federation says the number of available rental properties in Auckland has increased by 1600 since May to nearly 5500.
There are also about 18,000 homes for sale in the Auckland area, many of which will be empty while waiting for a buyer.
Federation president Martin Evans says as interest rates fall, more buyers will be able to afford to buy homes and it will be easier for rental property providers to supply more homes.
"There are few property investors in the market right now."