Rises and falls in house prices don't affect everyone, all the time, says registered valuer Glenda Whitehead.
If you follow the news some weeks, you would think we are a nation of obsessed house traders. Some commentators present the housing market in a similar manner to which they report on the share market. In truth, in any one year only about 8 per cent of our entire housing stock turns over (although this ebbs and flows a little).
There are many ways to slice and dice statistics, but a few interesting facts calculated recently by the QV research team indicate:
* On average, people own a home for about seven years.
* One-third of people own their home for less than five years.
* One quarter have owned their homes for more than 10 years.
* 17 per cent of New Zealand homes have been owned for more than 31 years. Given that our statistics go back only to the early 1980s, we cannot calculate a percentage for any longer than 31 years.
If we dig below the nationally observed level, we see the figures for local areas differ somewhat, and I'm sure if we undertook a demographic overlay, it would tell us even more. That is, homes in some areas turnover frequently, while in others turnover is very low. But I digress.
So, with only around 8 per cent of people selling in any one year, it would suggest that for many people the rises and falls of the residential property market are merely observed from the sidelines. Or put another way, only a few of us should actually obsess about value change.
As mentioned earlier, this certainly doesn't seem to be the case, given the amount of publicity which exists around our housing market. Perhaps there is some solace in mentally "banking" what our commentators are telling us our largest investment is worth? Or shedding a few tears as may be the case more recently.
QV is such a commentator and as valuers, we contribute to this, just as we do in our Market Valuation reports for our clients. For a valuer-come-commentator, the 8 per cent of turnover is incredibly important, given that it sets precedent and provides evidence on which to base value. Without sales in a local market, we can't gauge true value levels for that area, and have to use adjacent areas to draw comparison. The reality is that property value levels tend to reflect what is happening in the other sectors of the economy, such as employment, interest rates and economic growth. Regular sales are therefore paramount in order to gauge how these other sectors reflect on the property market.
However, when it comes to value, the volume of turnover is perhaps less important than the supply and demand balance in an area. If either demand or supply is stronger, we see either a rising or falling market, and commentators make a public call for others to "mentally bank" the ramification for their property. Slow markets, but with a balance of supply and demand, are healthy, too, and will enable us to establish value levels and see trends over time. Those markets are about as exciting to observe as watching paint dry, but they are very real at the moment!
Residential property is owned for a number of reasons and, while in recent years we have seen increases in rental investments, the predominant reason for ownership is for a home (at 2006 Census home ownership was 67 per cent while in 1986 it was 73 per cent).
It appears that some of this focus has been lost in recent years with a significant increase in the number of residential properties held as rental investments. With the recent tax changes, we may see some focus shift away from this form of investment if, under the new regime, returns prove less enticing. Some volume will also be attributable to people actually banking their capital gains, perhaps as they downsize and move into retirement years.
Anecdotally, I would suggest that in recent times a healthy chunk of the 8 per cent market turnover has been driven by the investment portion of the market. If that market is less active, we may see a slow-down in turnover volumes, or a lengthening in the number of years of home ownership moving forward.
Could the focus of owning residential property return to that of providing a home for oneself? If it does, we could see public interest in the direction of property ease from obsession to mere moderate interest.
* Glenda Whitehead is QV valuations manager for QV Auckland.
