St Heliers Real Estate – Will Your Property Decline in Value?

A property investor recently predicted on television that the New Zealand property market will drop in value by 10 to 15 percent because the Government removed property taxation advantages in the budget.

St Heliers real estate owners can dismiss such numbers because their suburb is not prime property investment territory: the rental housing stock there is limited to 25 percent of the total dwellings according to Statistics NZ. All other property is owned, partly owned, or held in family trusts by owner-occupiers. Statistics NZ is a government department and is the major source of official statistical information about New Zealand.

Moreover St Heliers has some inbuilt protection because the three month moving average on Zoodle shows the median sales price for St Heliers lifted by 9.8% to $882,167. In addition listings there are declining and so is buyers choice. There are now 34% fewer new properties on the market than there were last month. When supply goes down price goes up provided demand is there. People still want to buy in St Heliers. Zoodle brings together information and facts from more than 1.5 million properties scattered across 1,600 suburbs in New Zealand.

Nevertheless ANZ, Westpac, and BNZ Bank economists agree there will be a short-term mild drop in property values before recovering back to current levels. However it is likely lower price suburbs will bear the brunt of the pain. Such areas are prime property investor territory and the investors will now pay less for property to regain what they lost in taxation advantages.

But a subdued though improving economy and inflation resulting primarily from the increase in Goods and Services Tax (GST) announced in the budget will help offset any price drops. The New Zealand Treasury is forecasting 5.9 percent inflation in the first quarter of 2011 before settling back to just over 2 percent per annum. So there could be insufficient time for falling property prices to reach expensive suburbs like St Heliers before inflation and the economy kicks in. The New Zealand Treasury is a government department and advises the government on economic and financial policy.

Chief economist Tony Alexander from the BNZ makes a valid point that any price declines will be counteracted by the growing imbalance between supply and demand: not enough housing being built to satisfy the demand for new stock. This will be exacerbated by workers earning more than $44,000 per annum choosing to stay in New Zealand because they will now pay less tax than if they went to Australia.

It is likely this imbalance will continue to grow in the year ahead given the slow growing economy and the GST increase to 15% beginning in October 2010. However the GST increase also helps protect St Heliers property values because any new houses that are built will have to sell for more to cover the cost of the extra tax. The ANZ, Westpac, and BNZ are major Australasian Banks with a large presence in New Zealand.

Owners of St Heliers real estate are in a fortunate position. They own expensive property in a neighbourhood where other owners do not give their money away easily – unless there is a good and valid reason to do so. Budget announcements and signs of an improving economy will also help underpin property values. It all helps to maintain property values in St Heliers and ensure buyers continue to pay fair market price.