New energy in the market

Real estate leaders on what buyers and sellers should expect in the coming months. Mike Bayley Bayleys Corporation MD

The log-jam in the Auckland market that had been building since around May, fuelled by buyer demand and a dearth of vendors bringing their properties to market, looks to have cleared, with more housing stock being advertised for sale.

That cyclicality now sits on top of a very stable long-term domestic economic situation - encompassing steady, albeit unspectacular, domestic economic growth; low levels of unemployment and the enduring sub-two per cent official cash rate keeping mortgage interest rates at low, low levels.

Legislative changes such as the new Residential Tenancies Act, the foreign buyer ban and the loss of tax breaks for rental properties, have all been absorbed into general real estate psyche.

Wage growth has rebalanced the home affordability equation for many, and for rental increases have raised yields to levels more palatable to the investment sector. Again, these factors pertain to a lifting in sales activity.

All of these indicators and drivers in the residential property market, combined with the warmer/drier weather, are pointing toward greater levels of trading over the coming four to five months in what, apart from a few years during the 2012-2017 era, has been the traditional busy selling period for residential real estate.

While listing numbers and sales volumes are picked to continue to rise over the shortterm, do not expect too much movement on pricing levels, albeit that they will be most likely lifting at a very gentle rate. Expect a more composed type of market behaviour this summer.

Josephine Kinsella LJ Hooker & Harveys MD

Following an unusually slow start to spring, the supply of residential properties for sale has experienced a resurgence in most regions.

South Auckland enjoyed busy months in terms of property sales and strong auctions results while listing volumes were strong in the Eastern Beaches. In West Auckland there was a noticeable resurgence for properties under $850,000. There is lots of energy in the first home buyer market, with “affordable” housing in demand.

Prices in Northland have stabilised but listings are down, and while the residential market in Waikato is steady, the rural market has seen dramatic change and there is minimal appetite from banks to take on the risk. However, properties that are well postioned are moving.

Dunedin and Otago are once again showing strength. Auction clearance rates there are high as is demand for investment properties. Areas like Oamaru, where rentals are in short supply, are offering eight per cent returns.

Lending activity to owneroccupiers continues to rise, driven predominantly by larger average loan sizes rather than more loans. With summer truly upon us, the short-term forecast is stability in the market and an increase in listing volumes.

The forecast for 2020 is positive - there are no immediate signs of dramatic change in the regions and Auckland is likely to bounce back ever so slightly. The biggest challenge will be the market’s response to lack of supply.

Peter Thompson Barfoot & Thompson MD

”The market has finally overcome lingering concerns about a possible major price decline, and more people are accepting that current market activity is the new norm and the time is right to make decisions about their future housing needs.”

The Auckland residential real estate market in 2020 will build on the positive signs that are being experienced in the fourth quarter of this year.

Sales numbers grew as we emerged from the winter months, new listings were extremely strong and average and median prices showed modest increases. This has set the scene for a good start to the 2020 selling season.

The market has finally overcome lingering concerns about a possible major price decline, and more people are accepting that current market activity is the new norm and the time is right to make decisions about their future housing needs.

The key to maintaining market momentum in the first quarter of the new year will be the number of new listings reaching the market, coming from a combination of new builds and existing owners making the decision to trade up, downsize or relocate. Low mortgage interest rates and solid employment numbers are adding to the feeling of stability around property decision making.

Later in 2020 the normal winter slowdown followed by the “let’s wait” attitude a scheduled General Election invariably creates will tone down market prices should they start to rise too rapidly.

We may well see a return of investors to the market, who might look to realise funds from other assets to reinvesting in property.

Carey Smith Ray White CEO

The market is starting to show the value of the changes in the official cash interest rates, which has meant for many a potential change or upcoming change in their re-negotiated mortgage rates. If there is a further reduction in the OCR, this will signal increased affordability and allow more first home buyers to consider entering the market.

While banks continue to review their retail rates, 2020 will see lending remain tight as potential interest rates continue to drop. This will make homepurchasing more affordable and it could also invariably push up prices if listings remain at a continued lower level.

The changes brought about by the Healthy Homes Act will help investors maintain yield and provide for higher occupancy rates. In the area of property management, regulation will settle down in 2020.

Rents will continue to increase slightly, and vacancy rates will remain low over the coming year.

So, we see the overall market in 2020 being positive. There will be an increasing number of first home buyers and investors entering the market on the back of more affordable home loans. While property listings will remain competitive, we see this adding to potential price increases across New Zealand.