C21 Market Pulse | July 2024 | New Zealand

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WELCOME TO THE JULY 2024

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Century 21 New Zealand Ltd

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Jen Baird

Mitch Campbell

CoreLogic NZ

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P ROPERTY MARKET

A LITTLE CHILLY AMID ECONOMIC CHALLENGES

The Real Estate Institute of New Zealand (REINZ) released its June 2024 data today, showing a decrease in sales and median prices nationwide while listings continue to rise.

REINZ Chief Executive Jen Baird says that the property market in June is reflecting the wider economic climate in New Zealand. New listings have risen, continuing a trend seen in 2024, yet this increase contrasts with a noticeable decline in buyer activity, reflected in lower national sales figures.

The total number of properties sold in New Zealand decreased by 25.6% year–on–year, from 5,854 to 4,356, and by 32.6% compared to May 2024, from 6,461 to 4,356. Northland saw the only increase in sales, up by 11.9% year–on–year.

The most significant decreases year–on–year were West Coast (-51.2%), Tasman (-41.7%), Gisborne (-39.4%) and Auckland (-35.1%). All regions reported a decrease in sales compared to May 2024.

“The typical winter lull, compounded by current economic conditions, has contributed to lower levels of activity in the market. This sentiment is reinforced by seasonally adjusted figures, which reveal a national sales decrease of 11.1% compared to May 2024,

reflecting a market performance below expected levels. ” says Baird.

Median prices for June were mixed, with six of the sixteen regions increasing year–on–year. Taranaki and Gisborne stood out, with Taranaki’s median price increasing by 10.7% year–on–year ($570,000 to $631,000) and Gisborne up by 7.0% ($575,000 to $615,000).

Five regions saw an increase month–on–month (Taranaki +9.7% to $631,000; Gisborne +3.4% to $615,000; Auckland +2.7% to $1,048,000, Canterbury +1.5% to $690,000; Tasman +0.4% to $777,000).

The national median price decreased by 1.3% year–on–year, from $780,000 to $770,000, and saw no change compared with May 2024. For NZ, excluding Auckland, the median price was up slightly by 0.4% year–on–year, from $682,500 to $685,000, but decreased 0.6% compared to May 2024, from $689,000 to $685,000.

At the end of June, the national inventory level had increased 28.6% (+7,069) from 24,676 to 31,745

year–on–year and decreased 2.6% from 32,598 month–on–month. For New Zealand ex Auckland, inventory levels increased 25.1% (+3,929) year–on–year from 15,655 to 19,583 and decreased 3.2% compared to May 2024 (-647).

Nationally, listings increased by 25.5% year–on–year from 6,218 to 7,805. Twelve of the fifteen regions have seen a rise in new listings year–on–year, with significant increases in Wellington (+50.3%), Hawke’s Bay (+35.6%), Gisborne (+34.8%), Bay of Plenty and Canterbury (+33.6%), Auckland (+33.0%) and Otago (+23.4%).

Only two regions saw a decrease in new listings year–on–year: Northland (-26.0%) and Marlborough (-11.8%).

West Coast saw no change compared to June 2023 (49 new listings).

“The increased number of listings coming to market continues the trend we have seen all year, with high levels of choice for buyers nationwide. The winter months do tend to see fewer people choosing to sell, and this year is no different. Yet, regardless of the economic conditions, people’s lives

ANNUAL MEDIAN PRICE CHANGES

Source: REINZ Monthly Property Report 15 July 2024.

change, they grow families and retire and need to make a property decision alongside those changes.”

“SALESPEOPLE ARE SEEING SOME PROPERTIES COME TO MARKET DUE TO HIGH INTEREST RATES, COST OF LIVING PRESSURES AND CHANGING EMPLOYMENT CIRCUMSTANCES.”

Across NZ, there were 489 auctions in June 2024, which was 11.2% of all sales compared to 551 auctions (or 9.4% of all sales) in June 2023. The Auckland region called over half of the auction sales completed nationally in June, at 264 auctions (20.5% of all Auckland sales).

Nationally, median Days to Sell decreased by one day, from 48 to 47 days, compared to a year ago. For New Zealand, excluding Auckland, median Days to Sell decreased by two days year–on–year, from 49 to 47 days. In 11 of the 16 regions, median Days to Sell were lower compared with June 2023. Northland had the highest days to sell at 71 days compared to 69 in May 2024 and 56 compared to this time last year.

The HPI for New Zealand stood at 3,573 in June 2024, down 0.7% from May 2024 and up by 1.3% year–on–year. The average annual growth in the New Zealand HPI over the past five years has been 5.4% per annum, and it is currently 16.4% below the market peak reached in 2021.

“There was a notable decrease in buyer activity in June and a reduced sense of urgency. As more listings come to a well–stocked market, those who are in the position to buy are taking their time to carefully select their ideal home. While winter has set in, we have just seen a slight change in tone coming from the Reserve Bank suggesting that this cycle of interest rate pain may have an end in sight. This is a key factor in both buying and selling decisions but also has an impact on overall sentiment within the industry.” adds Baird. Click here to read the full report

WANAKA 8.3%

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C21.co.nz/property–report/

W HAT IS THE BEST WAY TO SELL MY PROPERTY?

There are several methods on how to sell a property, whether it be through auction, fixed price, or price–by–negotiation. The best method depends on several factors – the type of property, the vendor’s circumstances and current market conditions. Each has its own advantages and things to consider which can ultimately affect the outcome of the sale. Learn more about each method below.

AUCTION

These are often favoured for properties with unique features or those in high demand as it creates a sense of urgency among buyers. This method is particularly effective in markets where competition is high. The auction process provides a high level of transparency which appeals to both buyers and sellers, as it establishes a clear time frame and encourages competitive bidding. Generally the success of a property sale is far greater if it goes through this method however agents will need to have a clear strategy and communicate this plan with their team for the best results.

FIXED PRICE

A fixed price method of selling provides clarity and simplicity for both the buyer and the seller. It can attract serious buyers who are ready to make a straightforward purchase without the uncertainty of bidding. It’s often preferred for properties in stable markets or when the vendor needs to make a quick and fairly predictable sale. Setting the right

price however is crucial – pricing too high can deter potential buyers while pricing too low might not maximise the property’s value.

PRICE BY NEGOTIATION

This method offers flexibility and allows vendors to gauge interest before settling on a price. It can be suitable for properties that may appeal to buyers with varying budgets. It also allows for more personalised negotiations potentially leading to a sale price that reflects the property’s true market value. Negotiations can sometimes take time and there’s often a risk of buyers underestimating the property’s worth.

THERE’S A FEW THINGS TO CONSIDER WHEN DECIDING HOW TO SELL YOUR HOME:

Property Type: The nature of the property, its location and appeal to potential buyers influence the choice of selling method. For example an older building with a large land size will benefit from an auction to leverage its rare offering.

Vendor’s Circumstances: The vendor's financial needs, timeline for sale and willingness to handle negotiations can dictate the preferred selling method. Urgency might favour an auction while convenience might lean towards a fixed price.

Market Conditions: The current state of the real estate market and whether it favours buyers or sellers greatly impacts the effectiveness of each selling method. In a competitive market auctions can drive up prices, whereas in a slower market fixed price can attract more cautious buyers.

There is no one size fits all answer for the best way to sell a property. It’s essential for vendors to work with their real estate agent to assess their specific circumstances, understand the dynamics of their local market, the current economic climate and the unique features of their property.

Click here to find your local Century 21 agent today.

W HAT DOES A LANDLORD NEED TO KNOW? NZ’S HEALTHY HOMES STANDARDS

The Healthy Homes Standards are laws which were introduced by the New Zealand government and note the minimum standards for heating, insulation, ventilation, moisture ingress, drainage and draught stoppage for rental properties. These standards keep tenants warm and dry, and ensure landlords are responsible for ensuring their properties meet the standards and continue to do so over time. All rental properties will need to comply with these standards by 1 July 2025.

Over 600,000 households in New Zealand currently rent and research shows that rentals are generally poorer quality than owner occupied homes. Cold, damp and mouldy homes can cause health issues such as asthma and cardiovascular conditions. Improving the quality of rental homes benefits both the landlord and tenant, as those who rent will experience improved health and warmer and drier homes will be less likely to experience issues with mould and mildew. So what are the standards?

HEATING

One or more fixed heaters that can directly heat the main living room must be provided. They also must meet the minimum heating capacity required.

INSULATION

While ceiling and underfloor insulation has been compulsory in all rental homes since July 2019 these new standards build on the current regulations and means some existing insulation will need to be either topped up or replaced.

VENTILATION

Each livable space in a rental property must have a window or door that opens to the outside and be fixed in the open position. All kitchens and bathrooms must have an extractor fan to remove moisture.

MOISTURE INGRESS AND DRAINAGE

A rental property must have efficient drainage, guttering and downpipes for the removal of stormwater, surface water and groundwater. Where there is an enclosed subfloor, a ground moisture barrier is required.

DRAUGHT STOPPING

Landlords must block any unreasonable gaps or holes in walls, ceilings, windows, floors and doors.

There may be some situations in which a property is not required to meet some or all of the new healthy homes standards. However landlords who don’t meet their obligations are in breach of the Residential Tenancies Act 1986 and face consequences like financial penalties. New and renewed tenancy agreements must include a statement with details of the property’s current level of compliance. Landlords must also keep all records and documents to show how they are complying with the healthy homes standards.

Click here to read the full guide

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I NSIGHTS FROM THE FIELD: 10 THINGS TO KNOW ABOUT THE PROPERTY MARKET RIGHT NOW

Regulatory change is a huge theme for housing at present, so in this environment CoreLogic's Chief Property Economist Kelvin Davidson draws on some anecdotal insights gathered from market participants 'on the ground'. In this Pulse article covering 10 key aspects of the current market, we look at issues such as attitudes towards the rule changes, regional disparities, and sentiment among different buyers across the country.

1. THE ECONOMY IS HURTING.

To be fair, that’s nothing new, but it’s been a useful reality check to hear it directly from ‘real world’ mortgage advisors, estate agents, bankers, and property buyers. It’s also been a timely reminder that Q1’s 0.2% expansion in GDP is hardly anything to go overboard about.

2. PROPERTY BUYERS REMAIN KEEN, BUT GETTING DEALS DONE IS DIFFICULT.

Even despite the continued high levels of mortgage rates, buyers are still out there doing their due diligence. But with affordability remaining a key hurdle, until there is a bit more clarity about the potential timing for mortgage rates to start falling, it may still remain tricky for many people to convert a willingness to buy property into an actual deal. However, it’s also

worth noting that, anecdotally, the affordability/serviceability rules have recently been eased a little by some banks – as covered on recent guest episodes of the NZ Property Market Podcast.

3. FAR FROM BEING ‘BAD POLICY’, THE BALANCE OF OPINION IS THAT DEBT TO INCOME RESTRICTIONS ARE WORTH A TRY.

Sure, some people think the DTIs are a terrible idea. But on balance, more people seem to think they’re worth a shot, if they can help slowly restore some kind of normality for our housing market in terms of affordability.

4. BUYERS IN THE PROVINCES AREN’T UNDULY CONCERNED ABOUT DTI CAPS.

Although there’s a strong awareness that longer term declines in

mortgage rates will eventually start to see debt to income caps become a more significant restraint on lending, the sentiment in regional markets is still fairly relaxed. That’s because property values are lower in relation to incomes anyway, so high DTI lending is always less of an issue in these areas.

5. THERE IS INTEREST IN WHETHER OR NOT BANKS WILL ‘HOLD’ THE DTI SPEED LIMITS FOR MORE EXPENSIVE MARKETS.

If the 20% allowances for high DTI lending will actually just be reserved for borrowers in pricier areas, such as Auckland, that might mean mortgages can flow relatively well for everyone. But if those allowances aren’t reserved for expensive markets, it’s conceivable that some buyers from those areas will look outside their home patch.

6. EARLY ACTION COULD BE KEEPING FORMAL MORTGAGE STRESS INDICATORS LOW.

Given ‘higher for longer’ mortgage rates, there’s a sense that some property owners with large debts are acting early and making a change to their situation (e.g. downsizing, moving to a cheaper area) before real trouble arises. Of course, it’s not easy to prove this, as these sales are not readily identifiable in the records – they’re ‘just another sale’.

7. WHERE MORTGAGE STRESS DOES ARISE, THE FIRST STEP SEEMS TO BE A LOAN TERM EXTENSION RATHER THAN GOING INTEREST–ONLY. Opting for a loan extension from 25 to 30 years, for example, at least allows some principal to still be paid off.

8. THE SHORTER BRIGHTLINE TEST FROM 1ST JULY IS ARGUABLY GOING TO DRIVE MORE SELLING ACTIVITY THAN BUYING.

Due to the substantial top–ups required for some investors but also an early ‘escape’ from capital gains tax, no doubt some existing landlords will start to list. Of course, some people we spoke to will hang on, simply because a rise in new listings coming forward from other investors might make it an unfavourable time to sell.

9. ON TOP OF NORMAL WEEKLY OUTGOINGS, AWARENESS LEVELS THAT INVESTORS’ LARGEST TAX BILLS ARE ABOUT TO HIT MIGHT NOT BE FULLY RECOGNISED. Clearly, the overwhelming majority of property investors will know that deductibility was at its lowest level in the tax year ended 31st

March 2024, but it was also noted that some investors will be getting an unwelcome surprise with their latest tax bill. This extra financial hit could underline the selling potential noted above.

10. MANY PEOPLE WONDERED ABOUT THE LEVEL OF INTEREST RATES THAT WOULD BRING INVESTORS FULLY BACK TO THE MARKET, AND WHERE MORTGAGE RATES WILL GENERALLY SETTLE IN THE LONG TERM.

The first part of that question is very difficult to answer as it depends hugely on individual circumstances. For the second part, the consensus seems to be that a long–run assumption of a typical 5.0–5.5% mortgage rate on average is roughly fair.

Click here to read the full article

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