Is this the hardest place to buy a house in NZ?
Tauranga is facing a listings drought as it heads into the spring season
Tauranga is one of the tightest housing markets in New Zealand, new figures from Oneroof show. The number of new homes coming to market in the city last month was down 32 per cent on the month before — one of the sharpest drops in the country.
The city is in the unenviable position of facing a listings drought as it heads into the spring season.
Homes are selling fast, and while the city is unlikely to run out of houses for sale, the drop in listings will intensify competition and put further upwards pressure on prices.
Tauranga’s average property value hit $1.115 million last month, up 33 per cent or nearly $300,000 in the past 12 months. And unlike other major metros, Tauranga’s housing market has not slowed in the last quarter, with the city recording growth of more than 9 per cent.
The number of sales in the city has also crashed. At market peak in 2015, there were 6252 sales. Last year, there were 3400, and so far this year there have been 1779 settled sales, and it’s possible Tauranga will end up with fewer sales in 2021 than in 2008, when the housing market slumped postgfc and just 2259 properties sold.
Simon Martin, Harcourts Tauranga managing director, told Oneroof Tauranga’s listings drought started well before last month’s level 4 lockdown, which put a lot of the housing market on hold. “When we came out of lockdown last year, there were about 530 or so listings in Tauranga city alone [excluding Mount Maunganui or Pa¯pa¯moa]. Coming out of lockdown this year, we’re at less than half that, 215 listings,” he said.
“We were really light before lockdown, and coming into level 3 allowed a bit of a bump up, but not to the extent of meeting demand.”
Like other agency heads Oneroof spoke to, Martin attributed the surge in demand to Tauranga’s beach lifestyle, which attracts people from around New Zealand as well as returning Kiwis. “Once you come here, you don’t want to leave. There’s a lot of building going on, but is it enough? Supply will be difficult.”
While level 2 will see new properties coming on to the market, he said it won’t be the massive increase Tauranga needs to meet demand.
Richard Leary, general manager of New Zealand Sotheby’s International Realty, said while some vendors were holding off until Aucklanders were free to view properties in person, others were taking advantage of the huge numbers of website viewers by going ahead.
He is concerned that even if the hoped-for backlog of listings appears for the spring market, there will still not be enough properties available to meet the demand. “We’re probably 10-15 per cent down. Things will always get sold, but before a big sale was $2.5m, now it can be $3m to $4m.”
New Zealand Sotheby’s International Realty agent Chris Pringle concurred, adding that in the past 18 months, people hesitated to put their homes on the market because there wasn’t a lot available for them to buy.
“It’s a vicious cycle, and it just deepened through winter,” he said, pointing to popular suburbs that normally have 40 to 50 listings now barely having 20 properties at a time.
Simon Anderson, managing director at Realty Group which operates Bayleys and Eves, said even before this lockdown, listings for July were down 20 per cent. And in a market where some 20-30 per cent of open home visitors are from Auckland, he expects vendors targeting that market to hold off their campaigns until Aucklanders can travel again.
“I expect it will be a busier spring by about another 15 per cent. Now that people are seeing new stock come on, they’ll be more willing to buy. But there’s still an imbalance, an oversupply of buyers and an under-supply of property.”
Rapid growth of new-build suburbs like Pa¯pa¯moa, and even the newfound appeal of inner-city apartment living, still won’t produce enough new housing to match population growth.
The Tauranga-based chief executive of mortgage brokers Mortgage Lab, Rupert Gough, said the shortage was impacting his clients.
“We have tens of millions of dollars of prepared mortgages just sitting, waiting, around the country and just nothing to buy,” he said, with buyers feeling fatigued after looking unsuccessfully for months. “I don’t know how we’ll solve the stock issue. It takes a large group of people saying ‘I’m selling’ and maybe that will happen in October, or maybe after March next year when they get their tax invoice. Or maybe a few years.”
But the listings dearth is not unique to Tauranga. Infometrics economist Gareth Kiernan has been puzzling through the data to figure out why so few new listings are coming to market.
“There have been people moving to Tauranga from other parts of the country for some time. And it’s not just retirees, like it was in the 1990s. It’s more affordable than Auckland and it’s very much an economic hub.
“But we’re still getting our heads around why stock numbers have been steadily trending down for the last 10 or 12 years.”
Kiernan said after big building booms out to Pa¯pa¯moa, supply of residential land around the city itself was tight, meaning fewer new builds and buyers forced back to competing for existing builds.
In his new study, The curious case of the shrinking housing stock , he hypothesises that changes to the bright-line tax rules going back to 2015 mean investors, the property owners who are much more likely to sell a property to realise their capital gains in a growing market, are now doing their tax sums and hanging on.
“We estimate that between October 2016 and March 2019, for investors who had owned a property for one year, they would have been better off financially to have kept hold of the property for another year to avoid paying any capital gains tax, even if house prices fell by 1.9 per cent on average during that additional year. As it turned out, the nationwide median house price during the following year never rose by less than 1.5 per cent,” he said.
Changes in 2018 and this March have held investors back — despite the outcry at the time. The long-term news for more houses being listed for sale is not good. “The recent extension of the bright-line test to 10 years could result in a more persistent imbalance between buyer and seller numbers out to 2031, until all buyers and sellers are once again working to the same rules and incentives.”
James Wilson, director of valuation at Oneroof’s data partner Valocity, said there had been murmurs of a change from valuers and mortgage brokers, if not from real estate agents.
“They’re telling me it feels like we’re approaching the end of a boom cycle. We haven’t had a cataclysmic event like the GFC or a share market crash, but they’re seeing the first signs,” he said.