Missive Monday – New Zealand

Missive Monday – New Zealand



I subscribe to STRATFOR – which, for mine, offers the best publicly available international geopolitical analysis.  Their 2012 world forecast is worth a read.  Don’t expect Australia to get a mention in the 18 page doco, as we don’t rate too highly on the world stage.

I mention STRATFOR in the lead-up to this missive, because the introduction to the current annual forecast rings true and, whilst Australia doesn’t get singled out, the outlook has ramifications on how we do business in the future.

To paraphrase STRATFOR’s introduction:

“There are periods when the world undergoes radical shifts in a short time.  The last such period was 1989-1991.  During that time, the Soviet empire collapsed; the Japanese economic miracle ended; the Maastricht Treaty creating contemporary Europe was signed and Tiananmen Square defined China as a market economy.  Fundamental components of the world’s geopolitical and economic systems shifted radically, changing the rules for the next 20 years.

We are now in a similar cycle, one that began in 2008 and is still playing out.  In this period, the European Union has stopped functioning and has yet to see its new form defined; China has moved into a difficult social and economic phase and U.S. withdrawal from Iraq could change the balance of power in the region.  The simultaneous shifts in Europe, China and the Middle-East open the door to a new international framework replacing the one created in 1989-1991.

Our 2012 forecast is unique in that it is not a forecast for one year but one in a succession of years, all basically framed by the same realities.  2012 is a year which points to a new generational reality and a redefinition of how the world works.

2012 will not be the conclusion of this transformative process.  Neither was 1991 the conclusion.  However, just as 1991 was the year in which it became clear that the old world of the Cold War no longer functioned, 2012 is the year in which it will become clear that the current world system has come to an end, being replaced by changed players and changed dynamics.”

So we enter 2012 with a very muddled outlook.  We wrote about such a few weeks back.

Despite declining interest rates (which means things are tough economically – something too many property commentators forget), building boosts and first home buyer grants, the market for new dwellings remains tough and is likely to remain so for a long time.  There is no magic bullet coming to restore current stagnant sales rates – in fact, quite the opposite rings louder: there is a mountain of resale stock for sale; the new market is not undersupplied; aging demographics are also placing a brake on housing demand; housing credit expansion is on the wane and governments, at all levels, do not have the money to pump-prime the system.

So, it is back to the hard grind – just like it was for much of the 1990s.  And whilst many have jumped to position their properties to the Chinese, few, if any, have done so to our friends across the Tasman.  One property sales opportunity – and a big one – is New Zealand.

I have given several presentations on behalf of Australian developers over there in recent years.  The New Zealand audience is always keen but the organisation of such events is usually poor, sometimes bordering on unprofessional.  I have decided to organise such events in the future.

To that end my business, in conjunction with Ric King from Lifestyle Realty, will be holding a series of Property Information Forums in New Zealand over in the coming year, commencing in Christchurch, mid-March, to coincide with the initial payment of government funds to those residents who cannot rebuild within the “red zone.”

Please check out the website which I have recently launched – www.askmatusik.com for facts and figures relating to the devastating earthquakes and the number of Kiwis leaving Christchurch.

Last year 40,000 people left New Zealand to live in Australia; 28,320 moved here on a permanent basis, which is close to twice the number of Chinese who settled during 2011.  We estimate that there were 1,500 residential sales across Queensland to Kiwi migrants in 2011.  The official VG records show that the median price paid for a detached house by a recent New Zealand migrant was $A705,000 last year ($A924,000 average price).  The median land price paid was $A215,000 and the apartment price was $A613,000.  Many do purchase once they get over here, but our New Zealand connections tell us that they are greatly influenced by what they see or hear about when still living over the Tasman.

Whilst getting official information is difficult, as most claimants have signed confidentiality agreements with the Government and the insurer, we understand that the Christchurch earthquake payments are climbing.

There are close to 6,500 properties are now declared “Red” meaning they won’t be rebuilt and there are no caveats on the payout i.e. they can leave and come to Australia or elsewhere.  Kiwi’s are entitled to our first home owners grant and even the Queensland building boost.

Those affected by the earthquake are – we understand, based on our conversations with local Kiwi builders – getting about 30% more for their homes, in a payout, than they were possibly worth prior to the quakes.  The land value is being paid by the NZ government and the insurer is paying out the new build cost.  The new house build cost in Christchurch was around $1,200 per sqm prior to the quake.  Today it is approaching $2,600 and rising.  This is why the payments are high and with each new quake the build costs rise.

Trades people over there are earning very good money.  We understand many of them are looking to invest in Australia.  Some are even commuting back to New Zealand for work and have their family living over here.  TV advertising is currently promoting the need for 2,500 new mining jobs now across Queensland, with another 38,000 to follow.  Many of these jobs are likely to be filled by Kiwis.  Welcome to a new norm.

So far, 900 buildings across Christchurch have been demolished, $2.78b claims have been paid out and on top of 6,500 homes being declared “red” another 3,000 are in “orange” and “white” zones.  These are much more expensive properties and their payouts often exceed six figures.

Our Kiwi venture is new and innovative, and we think it is exciting.  We will be corralling the New Zealand interest as best we can to get their attention focused on the better new residential projects throughout Australia.

For those of you who haven’t worked with me before and who are keen to participate in this marketing initiative, I am keen to speak with you.  Please contact me direct on michael@matusik.com.au – and as always, any comments made via email will remain private and confidential.

 

This report is republished with permission of Matusik Property Insights.

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