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Cairns Lockie Mortgage Commentary

Cairns Lockie Mortgage Commentary

Issue 2004/11 25 June 2004

Welcome to the eleventh Cairns Lockie Mortgage Commentary for 2004. This is a fortnightly electronic newsletter, which aims to keep you informed on developments at Cairns Lockie, Mortgage Bankers and the mortgage market in general. Previous issues of this commentary can be found on our website

The Money Market

This morning (9am on 25 June 2004) the money markets were at the following levels:

Official cash rate 5.75% (unchanged)

90 day bill rate 6.15 (up from 6.05)

1 year swap rate 6.44 (up from 6.31)

3 year swap rate 6.63 (up from 6.62)

10 year bond rate 6.28 (down from 6.34)

Kiwi dollar 0.6270 (up from 0.6240)

Other Factors Forcing Up House Prices

Apart from general inflation, and popularity in certain sectors (such as coastal homes) there are other reasons why house prices are rising. We are seeing increases in building and compliance costs, and homes are getting larger. In 1990 the average cost to build a house was $703 per square metre, by 2003 this had increased to $935. The average house built in 1970 was 146 square metres whereas today it is in excess of 200 metres - an increase of 37%. This is despite family sizes getting smaller. Compliance costs are expected to continue to increase as City Councils impose stricter building codes following the leaky building syndrome.

Fewer Owner Occupiers

A recent study by property valuers, DTZ New Zealand, revealed some interesting facts about property ownership. More people are renting. In 1981 there were 142,068 rental dwellings and in 2001 there were 264,501. During the same period home ownership decreased from 72% to 68% of all households. This is unusual, as in Australia, United Kingdom, USA and Singapore and many European countries home ownership rates have been rising. It is also revealing to break these figures down on an ethnic basis. Europeans are renting less of the housing stock, dropping from 83% to 74% of total renting population. In 1981 European home ownership rates were 75% and by 2001 had dropped to 72%. But the home ownership rates of other groups has fallen more: Pacific Island from 39% (in 1981) to 35% (in 2001); Maori from 48% to 44%; and Asian from 68% to 59%. These trends are expected to continue.

Housing Market Update

Figures from the Real Estate Institute for May showed that house prices, particularly in Auckland remained firm, sales volumes have reduced slightly and it now takes on average 30 days instead of 29 days to sell your typical house. The median house price in May 2004 was $248,000 for NZ, up on last month at $242,000 and on May the previous year at $210,000. In Auckland the median price was $339,000 up from $330,000 on the previous month and way up from $289,000 the year before. Sales volume for May 2004 was 9416, slightly down on 9,594 in April and well down on May last year at 11,158. So we are not seeing any real slowdown yet.

Auckland Property Sells for $14.5 million

Recently a 31.5 hectare South Auckland property located at Karaka sold for $14.5 million. Karaka is a thirty minute drive from the CBD outside of peak traffic times. The property had a modern superior dwelling, tree line driveway and was surrounded by grazing horses and cattle. The main reason for this high price was the property's sub-divisional potential. Auckland is growing at the rate of a Dunedin every four years and there is a strong demand for any land that is suitable for residential housing development.

Our current mortgage interest rates are as follows

Variable rate 7.65%

No Financials Home Loan 8.65

Jumbo Loan 7.65

Quick Start Home Loan 7.25

One-year fixed rate 7.56

Two-year fixed rate 7.67

Three-year fixed rate 7.79

Five-year fixed rate 7.91

Line of credit facility 7.75

Regards William Cairns James Lockie

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