C21 Market Pulse | June 2023 | New Zealand

C21

MARKET PULSE

WELCOME TO THE June 2023

ISSUE OF C21 MARKeT PuLSe

P u BLISH e R

Century 21 New Zealand Ltd

CO n TRIB u TORS

Tim Kearins

Jen Baird

Cameron Brewer

e DITORIAL en Q u IRI e S

Century 21 New Zealand

+64 9414 6041

ADV e RTISI n G en Q u IRI e S

Century 21 New Zealand

+64 9414 6041

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e ARLY SIG n S OF R e T u R n I n G CO nFID en C e AS SAL e S VOL u M e S RIS e I n THE REGIONS

The Real Estate Institute of New Zealand’s (REINZ) May 2023 figures show an increase in sales counts in some parts of the country while buyers and sellers in other parts continue to wait.

REINZ Chief Executive Jen Baird says as we head into the winter months, we are seeing glimpses of positivity, especially in the regions following the Reserve Bank’s announcement of easing loan-to-value restrictions and the stabilising of interest rates.

Nationally, the May 2023 median price decreased 8.2% year-on-year to $780,000 but saw no change month-on-month. The median days to sell has risen to 49 days for May 2023 – up 6 days compared to May 2022, and up 3 days from 46, when compared to April 2023. New Zealand excluding Auckland, saw a decrease in the median price of 6.5% to $685,000 and a 2.1% decrease month-on-month.

In the regions, Nelson had the biggest median price rise this

BY JEN BAIRD, REINZ CEO

month at 2.7% year-on-year and 6.9% month-on-month to $770,000. The West Coast saw another increase with a month-onmonth rise of 3.1%. Two districts reached record median prices: Grey District with a 18.7% increase year-on-year ($400,000) and Waitomo District taking top spot with a 53.4% increase year-on-year ($655,000).

At the end of May, the total number of properties for sale across New Zealand was 26,685, up 250 properties (0.9%) year-on-year, and down 6.8% month-on-month. New Zealand, excluding Auckland, was also up from 15,799 to 17,015, an increase of 1,216 properties annually (+7.7%). Month-on-month, inventory decreased 7.3%.

“Inventory levels look to have stabilised with only a slight increase in stock levels. We have seen low levels of property coming to market across the country for much of this year and, as sales volumes are back at more normal levels, we may be seeing the beginning of a shift in the balance of supply vs demand,” says Baird.

The total number of properties sold across New Zealand in May 2023 was 5,752, down from 5,776 in May 2022 (-0.4%), and up 30.0% month-on-month. New Zealand, excluding Auckland, sales counts increased by 1.4% year-on-year and 26.7% month-on-month.

Seven regions, Northland, Auckland, Waikato, Wellington, Tasman, Marlborough and Southland all had a 30% increase or more in sales volumes month-on-month, with Marlborough topping the list with 66.7% in sales.

“We do need to consider the typical changes that occur from April to May when interpretating the monthly sales count. Of those seven regions, it was only Marlborough, Tasman and Wellington that well exceeded what would typically be expected in May 2023 based on the April 2023 sales counts.”

“Northland and Waikato had a slightly larger increase in sales count from last month than is typical whereas the Auckland and Southland month-on-month movements in sales count were less than what typically happens

ANNUAL MEDIAN PRICE CHANGES

in those regions when moving from April to May,” comments Baird.

“We’ve heard from salespeople that most sellers are meeting the market while others are potentially holding tight on selling at a higher sale price, particularly if they had bought in the peak of the market. These tend to be the properties that stay on the market longer. Easing of loan-tovalue restrictions, commentary around peak inflation and a renewed confidence is seeing more first home buyers seek out opportunities,” states Baird.

Nationally, new listings decreased by 18.1%, from 8,983 listings in May 2022 to 7,359 listings in May

2023. Compared to April 2023, listings increased by 3.0% from 7,142. For New Zealand excluding Auckland listings decreased 17.4% year-on-year from 5,801 to 4,792. Auckland’s listings were down 19.3% from 3,182 to 2,567 year-on-year, but up 2.0% on April 2023.

The REINZ House Price Index (HPI) for New Zealand which measures the changing value of residential property nationwide showed an annual decrease of -11.2% for New Zealand and a -10.0% decrease for New Zealand excluding Auckland.

Click here to read the full report

Source: REINZ Monthly Property Report 15 June 2023 .

L VR e ASI n G L e ADI n G TO MOR e BORROWI n G en Q u IRI e S

The Reserve Bank’s easing of LVR restrictions is already seeing more first-home buyers making enquiries with banks and brokers.

This follows the Reserve Bank easing the loan-to-value ratio (LVR) limits on lending to owneroccupier borrowers with less than a 20 percent deposit, as well as allowing property investors to have a lower deposit.

The new, lesser LVR restrictions took effect on 1 June. It now means the previous 10% limit for loans with an LVR above 80% for owner occupiers, and 5% limit for loans with an LVR above 60% for investors has lifted to a 15% limit for loans with an LVR above 80% for owner occupiers, and 5% limit for loans with an LVR above 65% for investors.

The Reserve Bank was right in its assessment that the previous limits, which were put in place at the height of the pandemic, were now too tight and may be blocking creditworthy borrowers from borrowing.

This provides banks, brokers, and importantly, borrowers a little more

wriggle room. Anecdotally, we are hearing that lenders are getting more enquiries. Nonetheless, borrowing remains tough.

Also encouraging is the fact that while the property market has fallen about 17% since the peak in late 2021, the rate of decline is reportedly slowing. Further, in its monetary policy statement last month, the Reserve Bank said house prices had fallen to a more sustainable level.

REINZ recently reported that real estate agents across the country are seeing glimpses of green shoots in the market as first-home buyers show more interest after the Reserve Bank’s announced on the easing of LVR restrictions.

Let’s not forget that rents are still high, and for many if they can organise a mortgage and buy this winter, they won’t look back. As well as softer prices, vendors are gradually becoming more attuned to realistic expectations. Many vendors are also keen to sell before the General Election campaign which sees Kiwis delaying their decisions.

The arrival of Credit Contract & Consumer Finance Act (CCCFA)

BY TIM KEARINS, CENTURY 21 NEW ZEALAND

saw a serious credit crunch from late 2020. Despite some Government tweaking since, big retail banks continue to conduct ultra-conservative assessments on all new borrowers.

If prospective property buyers can stump up a deposit and prove their ability to service a mortgage, they might be surprised with what a mortgage broker can offer. To help their cause, new borrowers should also consider getting in a flatmate or boarder. That income could make all the difference in getting them over the line.

Mortgage brokers have come into their own in the past couple of years and are playing a key role in 2023 getting more Kiwis into home ownership. The likes of Julius Capilitan of Century 21 Financial do all the running around, delivering competitive rates and greater borrowing flexibility than traditional banks.

The latest easing of the LVRs is a positive for first-home buyers, who should look into it if they haven’t already.

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TOP DIY MISTAK e S TO AVOID WH en PR e PARI n G YO u R HOM e FOR SAL e

DIY projects are popular among homeowners looking to add value to their homes without breaking the bank. However, it's crucial to steer clear of common mistakes that could reduce your home's appeal to potential buyers when it's time to sell. Here are the top DIY mistakes to avoid.

NOT KNOWING WHEN TO CALL A PROFESSIONAL

One of the biggest mistakes homeowners make is skipping professional consultation. While DIY projects can be fun and rewarding, it's important to know when to seek professional help. Overestimating your skills can result in mistakes and even safety hazards. For example, if you're not sure about the structural integrity of a wall, consulting a professional

is the safest and most efficient option. Skipping this step can lead to costly mistakes and potentially lower your home's value.

OVERPERSONALISING YOUR HOME

While you may love bold colors or unique decor, potential buyers may not share the same taste. Overpersonalising your home can make it difficult for buyers to envision themselves living in the space. It's important to keep your

decor neutral and appealing to a wide range of buyers to maximise your home's appeal.

IGNORING CURB APPEAL

Curb appeal is the first impression potential buyers have of your home, so it's important to make a good one. This includes everything from maintaining your landscaping to painting your front door. Ignoring curb appeal can turn off potential buyers before they even step inside.

NOT COMPLETING PROJECTS

Starting a DIY project and not completing it can have a negative impact on your home's value. Potential buyers may view it as a sign of neglect or even assume that there are other unfinished projects in the home. It's important to finish all projects before putting your home on the market.

CUTTING CORNERS

Cutting corners may save you time and money in the short term, but it can have negative consequences in the long term. This can include

using cheap materials or skipping steps in the project. By cutting corners, you risk having to redo the entire project or even causing damage to your home.

FAILING TO CONSIDER ROI

Before starting a DIY project, it's important to consider the return on investment (ROI). Some projects may add value to your home and increase its appeal to potential

buyers, while others may not be worth the time and money. It's important to consult with a real estate agent or home appraiser to determine which projects will have the biggest impact on your home's value.

NOT TESTING BEFORE YOU START

Before starting any DIY project, it's important to test the materials and tools you'll be using. This can include testing paint colors on a

small area or testing a power tool on a scrap piece of wood. By testing beforehand, you can ensure that everything works properly and avoid costly mistakes.

By avoiding these common DIY mistakes, you can maximize your home's appeal to potential buyers and increase its value.

TOO MA n Y GOOD LA n DLORDS L e AVI n G TH e HO u SI n G MARK e T

“Often the best landlords are the mum and dads, but unfortunately many are now exiting the market as it has just got too tough,” says Tim Kearins, Owner of Century 21 New Zealand.

He says the pressures on rental stock have only grown, not helped by the Auckland floods and Cyclone Gabrielle earlier this year. Then there’s more regulation and a loss of tax deductibility on landlords’ mortgage interest costs.

“Housing supply is coming on stream, but the demand is huge, particularly when you consider the likes of strong inbound migration, people living longer, and more families banding together under one roof to minimise cost.

“Further, thousands remain in emergency housing including motels, and over 20,000 are on the public housing waiting list. The social need is massive, and we see it every day in Palmerston North,” he says.

In March MBIE’s Tenancy Services Rental Bond Data released showed that median rents nationwide are

up $175 per week since 2017 –reaching $575.

“We need more landlords, not fewer, but sadly many have chosen to invest elsewhere, such as commercial property syndications, or keep their money in the bank given rising term deposit returns,” he says.

The Century 21 leader says a final nail in the coffin for many ‘mum and dad’ landlords has been the loss of tax deductibility on interest costs.

Previously, 100% of interest could be claimed as an expense by residential landlords, but that is now being incrementally phased out. Currently at 50%, it moves to 25% on 1 April 2024, and then to zero on 1 April 2025.

On 24 May, the Reserve Bank again hiked the Official Cash Rate (OCR), taking it to 5.50% – its highest level since 2008 when it reached 8.25%. A week earlier, Treasury forecast further falls in house prices and a slower rebound, with unemployment expected to peak at 5.3%.

“With the cost-of-living crisis in full swing, it’s a tough time for tenants,

and with all the red-tape and expense, it’s tough for landlords. However, this challenging real estate environment also throws up opportunities for those considering getting into residential property investment or looking to buy their first home.

“With rents not easing, this winter will be a good time for investors and first-home buyers to purchase with vendors getting more realistic, and more choice both in with new-builds and existing homes,” he says.

Tim Kearins says potential first-home buyers should also check out government support schemes to help them pull together a deposit.

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