Some real estate agents in the regions say prices have gone so high they fear fewer people will end up owning their own homes. But they also say there is land out there and councils and the Government need to open it up for building. The Reserve Management Act is stifling progress and until these issues are sorted prices will not likely recede. In the meantime, FOMO (fear of missing out) rages on in the regions and this is also contributing to high prices.
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Elanor MacDonald, of Ray White Hawke’s Bay, says the market started slowly last year but momentum was well underway by Christmas.
“The number of properties available has dropped considerably and we are still very short of properties to both sell and rent across Napier, Hastings and central Hawke’s Bay. It is difficult to see how and when this shortage will be alleviated.”
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Rising prices are still an issue, especially for first-home buyers, due to the supply and demand problems.
“There is a lack of new development due to a shortage of affordable available land.
“Councils need to look at policy to allow further re-zoning and faster resource consent for land developments.”
Sellers who can afford to buy first and then sell are in the box seat, she says, along with investors who often don’t require the same level of due diligence as first home buyers.
Sellers reluctant to market their homes in case they can’t find another property are likely to miss out in a competitive situation when they put in offers conditional upon selling, and buyers need to move quickly with due diligence to ensure they have their ducks in a row before making offers.
Havelock North has felt market heat in the months since the lockdown lifted last year. Photo / Supplied
While MacDonald still sees Covid as a threat, she says the market doesn’t appear to agree.
In Hamilton, Jeremy O’Rourke, from Lodge Real Estate, says last year “we went in with a housing crisis and came out with the same crisis.
“We didn’t have enough houses for our population beforehand and so afterwards supply continues to be the issue, not the pandemic.”
The buoyant Hamilton economy is attracting a lot of talent to the city, with housing consents hitting their highest levels last year but when, and if, the market will level out is impossible to predict, he says.
“For now, the biggest opportunity for buyers and sellers is the market itself. Whatever property a buyer can get into I would do so as the market continues to rise and those not in risk being left behind.”
Buyers may find opportunities in developments like duplexes and by hunting for good properties in less popular suburbs.
Immune to the virus?
Fraser Coombes, managing director of Ray White Hamilton, says first-home buyers and investors remain active but, as they don’t add to supply, demand is likely to outpace supply again this year resulting in higher prices.
“Housing affordability will be a major political discussion point this year. While we would all like to see homeownership more accessible and housing affordability improve, I cannot foresee a quick solution.
“Simply put, there needs to be a concentrated effort on increasing supply and making it easier for developers to build at pace.”
Purchasing off the plans this year is likely to be a real opportunity for buyers who can often expect price growth come time of completion, and while Coombes sees Covid as an idle threat to the market. He says last year was a reminder how much Kiwis love property and see it as a safe way of holding wealth in uncertain times.
“I wouldn’t say house buying is immune to the virus but I would say Kiwis’ passion for property, be it a first home, upsizer, downsizer or investor, remains very strong and optimistic across most markets.”
A real estate window in Papamoa, Tauranga. The suburb has seen a lot of buyer action. Photo / Supplied
Simon Anderson, from Realty Group, Tauranga, says for every buyer there are others who miss out, so availability of property is key in the year ahead but housing affordability is a real worry.
“As a parent of three children, and a holder of the Kiwi dream, my hope is for them to own their own home one day.
“The easy solution is to just build more affordable homes, however, the fact is we all know there are no free tradespeople right now to build more homes, even if we could source the land.
“It’s not a magic wand exercise but a holistic approach is needed across central and local government plus developers and landowners.”
LVRs in the frame
A big concern is the number of people in emergency or temporary accommodation due to the shortage of rentals and suitable property, he says.
Anderson also says Covid remains a concern but that owning a home gives certainty — but to remember repayment happens monthly and interest rates can change.
Simon Tremain, of Tremains Hawkes Bay, says Tauranga, Rotorua, Taupō, Hawke’s Bay and the Wairarapa represent the heart of regional New Zealand in the North Island with buyer demand at an all-time high but a lack of supply.
“The current buyer frenzy does not look like having any change in the short-term, with new price levels being achieved in all our regions. I maintain regional New Zealand is where many families would like to live, providing they can find satisfactory employment and a family home to buy or rent.”
New builds are in demand. Photo / Getty Images
With LVRs due back soon and low interest rates, the year will be an interesting one to watch. “My main concern is for our children who will continue to find it near impossible to enter the New Zealand real estate market in the future.”
Ray White Rotorua’s Tim O’Sullivan agrees: “The thing I fear most for the housing market in the months ahead is that fewer and fewer people will, be able to own their own homes. I recently sold a property to a lovely young couple who had previously missed out on several properties, however, they were over the moon to have finally achieved their dream. They wanted us to leave the SOLD sign up after they moved in because it was still so surreal, as they put it, to at last own their own slice of heaven.”
What gives O’Sullivan hope is market forces eventually leading to councils and the Government freeing up more land. “We have so many clients wanting to build a new home but there are only a small number of sections available. The economic benefits when someone builds a new home are immense. Apart from building the house with all the associated trades involved and the building materials, you have new fences, driveways, and landscaping, which includes lawns, plantings, veggie patches, fruit trees, etc,” he says.
“The roll-on effect from that is that many who build a new home have an existing home to sell which creates more stock to the market and the new owners of that home will often double-glaze the home, modernise the kitchen and bathroom and in some cases create a second bathroom.”
Pressure on prices
Shona Duncan, principal of Sothebys Rotorua, says limited stock is putting upward pressure on prices. “These record levels manifest in houses selling quickly (24 days is the current regional average) and at record prices as buyers have to spend more to secure the scarce properties on offer.”
And Steve Lovegrove, of the Professionals Rotorua, expects when the borders reopen there will be an explosion of people wanting to migrate to New Zealand.
“We will emerge as the most desirable safe haven from any perspective and thus people with money and the means to do so will flock here. Unless we can dramatically exceed — and, I mean, it will take a miracle — the level of demand increase for housing through massive injection of supply our marketplace and prices will not recede any time soon.”
Lovegrove says house prices are not the problem to housing affordability issues. “Far from it. Housing supply is. Prices are only a consequence of poor supply — fix the supply issue and you fix the price problem.”
The Reserve Management Act is the real problem — “it is the cholesterol that is clogging up the flow of critically-needed housing supply”.
“We absolutely must see bureaucracy cut at central and local government levels and the flow of supply released — any other suggestion is like using band aid for heart surgery.”
In this market buyers should take advantage of capital gains and pay the bank back faster while there are low interest rates, and sellers should get the sharpest negotiator they can. “Don’t ever go with a discount agency. If they don’t know their own worth they won’t be able to establish yours. You need a tough negotiator to make the most of the competition,” Lovegrove says.
“Here’s a clue: it’s your biggest asset. Get the most expensive agent that refuses to discount his fee — that’s the same guy/girl that will use those very skills to get that genuinely better offer for you.”
As for Covid, the housing market has always been immune, Lovegrove says. “Houses don’t catch the flu, but it does seem to cause havoc among economists. In fact, Covid 19 has been a catalyst for house prices if anything and will continue to be so.”
Shaking confidence
Ritesh Verma, branch manager of Property Brokers Whanganui, says if Covid does return there could be a slow-down.
More houses have entered the market since Christmas but there’s still a shortage and he also worries about housing affordability.
“As much as it’s good to see house prices rising you don’t like to see homelessness or first home buyers being priced out of the market.
“Freeing up land faster and making the RMA easier to work through will be good and with the Government announcing more state houses to be built this year will help, however, this probably won’t come soon enough for some.”
John Bartley, of Bayleys Whanganui, says even the lowest interest rates in a decade are no match for the rate of increase in house prices and unless wages increase the Kiwi goal of home ownership will not be a reality for many.
There has been no return to normal since Covid arrived, he says. “The potential for a second wave of the virus has meant the real estate sector and other industries have had to adapt how we do things.”
Tony Grindle, of Bayleys Whangarei, expects the market to remain strong unless vendors price too high because buyers will eventually give signs the price is out of step with the market.
The biggest opportunities are in areas which have not experienced such intense market scrutiny, such as Onerahi, Waipu, Ruakaka and the Far North.
And while Covid can stall markets, Grindle thinks the impact would only be temporary. “In New Zealand it has probably accelerated the demand for provincial living away from the masses.”
Buyers, however, should factor in interest rate rises into their budgets.
Paul Beazley, from Eves Whāngārei, says pressure will remain on the Government and the construction industry to increase housing stock. His district is growing because of a preference by people to move north to an increasingly vibrant city which will ensure demand continues for new and existing homes, as well as investment property. “If I were planning to sell I would get into the market right now to take advantage of the record prices and strong demand.”
And Mile Beazley, from Harcourts Whāngārei, says further pressure on availability will be created from buyers keen to get into the market before more anticipated rises and the reintroduction of LVRs. “Those considering selling are in a prime position, however, the question to ask is, ‘Where to next?’”
Covid is still causing uncertainty and at times shaking confidence but Beazley says if there were major interruptions people would pause and adapt then the market would fast return to positive territory. Right now, the Fear of Missing Out has never been stronger — the volume of buyers out there is incredible.”
