March 2017 was an interesting month for the property market across New Zealand, with house price increases cooling in Auckland and the number of properties listed across the country rising to record new levels. Could this be the first signs of a market change? Read on to find out more about recent changes to the New Zealand property market.
House listings on the rise
Data from realestate.co.nz shows the number of houses for sale across New Zealand has risen sharply, a pattern which some experts say could indicate a change to the property market.
Throughout New Zealand in March 2017, there were 13,069 properties listed for sale, up 10.8 per cent on March 2016, and for only the second time in a decade, the number of houses listed in March exceeded those in February.
Spokesperson for realestate.co.nz, Vanessa Taylor, said "It could well be that after the volatile nature of 2016, potential sellers have taken on board that the market has been relatively flat in the past few months.
"If they've been talking about making a move on the property ladder, whether up, down, or even out of the region, they may have more confidence that their next purchase will be in the context of a more stable price environment."
The national average price remained steady in March 2017, with Auckland’s previously-hot market remaining relatively unchanged at only a 0.2 per cent increase on March 2016.
With more properties to choose from at a far more stabilised price, New Zealand’s property market could well be heading towards a buyer’s market.
"There is more choice out there so buyers who are property hunting will be able to find more properties that are in their criteria,” said Vanessa Taylor.
"And it also means that if you are selling your house you get more of an idea around the price banding and if you are buying in the same market it gives you that stability, so I think it works out for both sides."
The downside to Auckland's cooling property market
Despite a cooling down of Auckland’s housing market, first home-buyers continue to struggle to enter the property market. And with interest rates tipped to rise amidst an estimated 40,000 property shortfall, it’s likely they’ll continue to struggle for the foreseeable future.
Ashley Church, chief executive of Property Institute of New Zealand, says the easing of house prices is “unlikely to bring much relief to first-home buyers”, while it would worsen the housing supply problem in Auckland.
"Although rising house prices have been a problem - the lower cost of borrowing has meant that some first-home buyers could still enter the market. That small advantage will now be largely offset by rising interest rates, which will also start to quickly erode the amounts that banks are prepared to lend to those borrowers."
Mr. Church says the key to alleviating the city’s shortage of affordable homes is to divert investors into building new properties.
"Auckland still needs over 40,000 new houses and we've long been of the view that the way to get those built quickly was to divert property investors away from existing dwellings and into investing in new homes."
While there has been some debate over the extent to which investors have been a factor in the Auckland property market, their impact on the market has regardless been significant. Recent figures from CoreLogic show 44 per cent of all homes sold in January 2017 were sold to investors, and only 19 per cent were bought by first-home buyers. There’s little doubt though that the Reserve Bank’s loan-to-value restrictions have slowed down the market.
"Depending on which figure you believe - property investors have represented between a quarter and almost half of the market,” said Mr. Church.
"With the right incentives, those are people who could have been diverted into investment in new dwellings - but instead, most of them will now disappear from the market."
However, new figures released by CoreLogic on the weekend showed investor activity on existing homes remained strong, with 44 per cent of all houses sold in the first month of the year sold to investors. Only 19 per cent were bought by first-home buyers.
Rising interest rates, a cooling market, and higher borrowing costs are not good news for the market, said Church.
There’s no doubt that residential property remains a worthwhile investment. Talk to a Mortgage Express adviser about the options available to you.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Mortgage Express Limited for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.