Expert views: What’s ahead for housing
Moving into the second decade of the 21st century it’s difficult to say what the economy — and in particular the housing market, is going to do next.
After a year in which the country faced its biggest health crisis in 100 years, the economic meltdown, job losses and company failures New Zealanders were primed to expect, have largely failed to materialise.
At the height of the emergency, such doomsday scenarios were predicted to result in a cooling effect on the property market; however, a year after the protracted lockdown of March and April 2020, it’s more
OneRoof polled New Zealand’s real estate leaders on their expectations for the housing market following an unprecedented year for the industry.
No one could have foreseen a complete shutdown of the housing market last year, nor could they have predicted that house prices would actually rise in the aftermath of the Covid lockdown. The real estate industry has never been so busy, and more hungry for listings.
The industry also finds itself facing tough questions on what it can do to help get more Kiwis into their own properties.
Bayleys managing director: The fundamentals that drove the market onwards and upwards last year are still in place: record-low interest rates, a reasonably resilient economy and a good level of business confidence . . . The market is showing no signs of slowing.
Ray White chief executive: First-home buyers entering the market are doing so on the strength of the economy and given the number of buyers in the investor and first-home classification has now reached 50 per cent this is giving significant momentum to the market.
Harcourts New Zealand managing director: In early 2020 we experienced the usual flood of opinions from commentators regarding their expectations of the real estate market . . . and we all know how accurate those predictions turned out to be . . . I guess we will allow hindsight to once again be the most accurate judge. buoyant than ever — underpinned by seemingly insatiable demand, limited supply, returning expats and recordlow rates. Here are key areas to watch as the industry navigates through unprecedented and uncertain times.
LVR (loan to value ratio) limits have worked to temper the investment property market in the past, and the Reserve Bank of New Zealand plans to reinstate them just before the second quarter of 2021. While they’re designed to slow the market and increase affordability levels, I suspect we’re going to see an uplift in the immediate future as
and
UP Real Estate directors: As the number of available homes decreases, competition among buyers will likely increase and we expect prices will continue to firm accordingly.
Barfoot and Thompson managing director: There is no short-term solution but in the medium-term the key is building more and within the mix including more affordable homes. To achieve this requires changes to the RMA and even more flexible financing options for first-time buyers.
national network manager LJ Hooker & Harveys New Zealand: Like any product value it’s driven by “supply and demand” and prices can only be driven up while affordable to the buyer. As interest rates change, so will the market and its direction.
Mike Pero potential buyers race to purchase before the new rules.
Supply will continue being a challenge, given that New Zealand needs an estimated additional 100,000 residential properties.
Building consents are currently at their highest point since 1974, but those dwellings still have to be built and demand is not being met in almost all of the provinces. Working remotely has become easy and acceptable in many sectors fuelling movement between regions.
Lack of supply leads to affordability issues and demand is still pushing up prices. Of course, this situation brings a sense of wealth to those with significant equity in their properties and no intention to sell, chief executive: More affordable housing being built will go a long way to helping solve this pressure for first-home buyers. However, prices are out of whack against the average Kiwi income. We are seeing a lot of friends club together for a deposit or parents helping using equity from their home.
Interest rates will be a natural hedge against potential long-term continuation of rising prices. If interest rates remain low
. . . prices will go up because of confidence.
We need to see more government policy that will encourage residential construction at scale and speed to help more Kiwis get into their first homes. Councils need to take a less bureaucratic and faster approach to processing consents. The government should take a close look at providing deposit funding for first-home buyers and those eligible for affordable homes.
New Zealand does not have the housing stock to meet demand, so prices have risen. This supply/
CS: MB: BT: BT: PT: BG: CS:
which ultimately benefits the economy as these homeowners spend their cash.
Even when the new LVR rules are in place, I don’t envisage the affordability issue being resolved in the short to medium term.
Ironically, despite the current low interest rates, first-home buyers are still finding themselves continually frustrated, with multiple offers on the sorts of residential properties that used to be a beginner’s domain.
The return of LVRs is supposed to help these people out by slowing down property investment but even if it does, banks are still being conservative when it comes to lending. Given most first-home buyers are now in their mid-30s, they demand balance remains in play for 2021 and is the key . . . to addressing . . . affordability.
and Supply and demand factors have caused some dramatic increases in prices . . . . We are aware of some current buyers having already sold and now finding it difficult to repurchase in the same suburb.
GL:
Is Covid still a threat to the housing market?
MC:
The impact of Covid will continue to be felt, especially in our tourist regions, however, we have a much better understanding of the impact now. . . I think we are more prepared.
New Zealand’s current success in the battle against Covid [has] not only attracted Kiwis living offshore to consider coming home, increasing the demand for property, but has also increased the confidence of those of us living here — a key driver for all forms of investment decision-making.
What should sellers do right now?
MB:
Choose a no-price sale method with a deadline, such as auction, to take advantage of the strong competition . . . to get the best possible price.
I’d waste no time listing my property. There is strong buyer demand, prices are at all-time highs.
I’d be realistic and do not get too ambitious. Properties are selling but this bubble could change/adjust quickly. Covid-19 is still a threat and as housing prices rise with the demand, buyer affordability will decrease and the buyer pool will get smaller . . . slowing down this overwhelming demand . . . and creating a much more normal . . . market.
I would ensure my property is marketed to a wide audience of potential purchasers. could potentially still be paying off their mortgage after retirement. In other words, the banks see it as their responsibility to take a long-term view — and of course it’s in their own best interests to do so.
However, it’s not all doom and gloom for first-home buyers if they’re prepared to be flexible. Banks are increasingly open to creative approaches. First-home buyers can often get significant help from their parents; co-ownership with friends and family is often feasible, rent-tobuy schemes are increasingly common, and we’re even seeing couples joining forces and collaborating on a do-up to build equity.
Government regulations are also set to change property trends in 2021.